Real Estate Information

The ability to negotiate commissions properly has the most dramatic effect on how much profit you make in your business, because if you are talented you make more money on the same sale. If you do not handle this part of negotiations well, you will do all the work for nothing.

 

As far as your own income is concerned, you do not get what you deserve, you get what you negotiate.

 

Negotiating Listing Commissions

 

Real estate commissions are highly negotiable. Real estate as a profession is one of the most creative in offering different models of service that provide for different amounts of payment.

 

Concentrate on Value

 

One of the best ways to negotiate the commission on a listing is to provide such an image of marketing, service and advice that the clients would not ask you to negotiate your commission. Explain the features of your marketing, the exceptional services you provide, and the benefit of your negotiating skill to give the client an appreciation of the value.

 

Confidence

 

Brodrow’s Law from Negotiation Bootcamp is to be willing to walk away, always. The sellers will sense if you are desperate. They will also sense if you are willing to walk away. Convey your interest in listing their property, but also show your willingness to walk away in order to strengthen your bargaining position.

 

Higher Authority

 

Another approach is to use the higher authority technique. Indicate that your firm has a policy of charging a particular commission, so you cannot lower the commission for them, as you would have to lower the commission for everyone.

 

Set Aside

 

Another way to deal with commission negotiations is to set the issue aside. Explain that you and the seller are a Team, both in this effort together. You depend on them to have a good house in good condition that is available for showings at reasonable times. They depend on you to get the attention of potential buyers, make them appreciate the special features of the home, and negotiate offers to a great deal.

 

If You Have to Cut the Commission

 

If you are going to cut your commission, try to negotiate it in dollars, not percent. After all, a one percent reduction in a six percent commission is actually a seventeen percent reduction in the commission. The commission rate will vary, as there is no standard commission rate, so use whatever is appropriate for you.

 

Do You Want to Make a Decent Living?

 

In order to provide for your family, you have to keep your clients from taking your money when you list a home for sale. Do you know how to negotiate when a discount broker is an option? Do you know how to use the basic economics of supply and demand to your advantage in order to get a commission that is higher than your competitors? Do you know how to get your client’s respect when you refuse to cut your commission?

 

For a more detailed discussion on this topic, please go to http://createagreatdeal.com/featured/commissions-your-money-your-life/.

If you have children and are moving into a new home, one of the things you are often most concerned about are the schools; but often first time homebuyer are young, and have no children or have young children that are not in school yet.   When this is the case, they assume that the school district is not an important part of the process of locating a home.  This may not be true, especially for the first time home buyers.

 

Statistics say that a first time home buyer will purchase another home within 5 yrs.  So, resale value of the first home will be an important factor.  With this in mind school districts will matter to you whether or not you have children. 

Contacting the school administration or at least looking at their websites will give you valuable information on test scores, school calendars and other vital statistics about the schools. 

 

For a more detailed discussion on this topic, please go to http://solonglandlord.com/steps-for-first-time-home-buyers-to-take/i-have-no-kids-so-schools-are-not-improtant-right.

It is all about money.  The bank is trying to minimize its loss by taking a short payment as a better choice than any alternative.  So, how much will they get?  The contract will not reveal the net proceeds; therefore, the bank wants a closing statement.

I used to send a Net Sheet for my sales in California, because many of the escrows do not use the standard HUD-1 closing statement.  When the bank rejected an offer three times because the package did not include a closing statement that they could easily spot, I learned my lesson. 

This started my second educational step on the HUD-1.  We bought software to create a HUD-1 and did them ourselves.  When we missed a couple of the charges that should have been figured more accurately, the shortage came out of my commission.

The third education came from unexpected costs that came up at the last minute.  The approval by the lender states that they will accept an exact amount of money, provided it is paid on or before a certain date, and provided that certain other conditions are met. 

So, figure the HUD-1 with some margin for error.   Figure the costs high, to set the lender’s expectations low. 

For a more detailed discussion on this topic, please go to http://shortsalesr.us/short-sale-dos-and-donts/do-an-accurate-closing-statement/.

When there are multiple offers on a property, the way you negotiate changes completely. I represent buyers, so here is a series of techniques that I use to have my clients be successful, because it is harder to get the home for your client when you have to win the competition.

The first thing you need to discuss with your client is how badly they want the home. Then you have to determine is what the listing agent is looking for in a buyer and what provisions are appealing to the seller.  The more of the desired terms that you give the seller, the more likely you will be the successful suitor.

The next thing you need to know is what procedure the agent representing the seller is going to follow to respond to all of the offers.  The most important information is how many buyers are making offers. If you are going to be the successful bidder, you will probably need to go over the asking price. How high you need to go depends on the number of buyers.   If you are in an area where multiple offers are not common, you may have a hard time convincing your buyer to offer more than the asking price.  Then it is crucial to show the seller that your client can close the sale, absolutely, for certain, no ifs ands or buts.

One other way to separate your buyer from the others is to commit that you will take the home “as is”, but retain the right to inspect the house.

For a more detailed discussion on this topic, please go to http://createagreatdeal.com/negotiating-multiple-offers/for-buyers/.

Goldilocks found that one item was too hot, another was too cold, and one was just right.  The pricing a short sale listing needs to follow the Goldilocks principle, not too high, not too low, but just right.

If you price the house too high, you will not get showings and offers.  To get the short sale process started, you normally have to present an offer to the lender, and you need to price well to get an offer.

Why not price too low?  You want to get an offer to start the short sale process, but if the offer is outrageously low the lender will not even open a file to review it.  Also, if you do not generate an offer that is close enough to the market value for the lender to accept, you will not get the lender approval so you will not close the sale. 

What is just right?  You want to stand out below the price of the other homes for sale, because you will have to give the buyer an incentive to go through all the difficulties of a short sale. 

There is an exception to the Goldilocks rule.  If you are facing foreclosure, do whatever it takes on the price to get an offer. 

Which side to your err on?  Go toward the low side in pricing instead of the high side.  It is better to have offers to submit, and get a counter offer from the lender, then try to get the buyer to accept the lender’s counter offer than to have no offers at all. 

For a more detailed discussion on this topic, please go to http://shortsalesr.us/short-sale-dos-and-donts/do-price-the-home-like-goldilocks/.

One of the tools our Team uses in negotiating offers is to decrease the size of the steps you take. With offers and counter offers, the two sides are moving closer on price. Start with your biggest change. Then, move less and less with each step.

Negotiation by Harvard Business Essentials makes the point that negotiating experts interpret a large concession as an indication that you have significant additional flexibility.

So, if you give a large concession, your counterpart will think they can get additional significant concessions. Particularly in a buyer’s market, it is important to get the buyer to want to continue the negotiations.

The Negotiation book also makes the point that a small change generally signals that process is approaching the party’s walk away price, and that further efforts will result in smaller and smaller concessions.

For a more detailed discusson on this topic, please go to http://createagreatdeal.com/principles/tools/smaller-steps/.

One of the many reasons why first time homebuyers should be looking to buy soon is this great tax credit. It does not apply to everybody, or every house, but here are some of the basics.

1. You may qualify even if you have owned a home before.

2. The credit is 10% of the purchase price, up to $8,000.

3. This credit is available for home sales closed between Jan. 1 and Nov. 30, 2009 only.

4. This is only for personal residences, not rental or other investment property, not vacation homes.

5. If you are an individual with an Adjusted Gross Income of $75,000 or less, you can earn the whole credit. If you make more than that, the credit gets reduced based on how much more you earned, disappearing entirely at $95,000. Same deal for joint tax return filers but the reduction starting point is $150,000, and the credit is gone at $170,000.

6. Look at IRS Form 5405 to see the surprisingly simple form for figuring your credit.

7. And a neat trick: if you buy in 2009 you can amend your 2008 tax return, re-file, and get the credit quickly, rather than waiting until early 2010 to file for it on your 2009 return!

8. People who are married but file separately instead of jointly can each claim up to $4,000 if all of the above rules fit.

9. You can’t get the money in time to use it for your downpayment; and you can’t convince the lender to count it in your assets before you have it to improve your ratios.

10. The credit is actually paid to you by the IRS. 

11. What if you are buying a home, expect to close by Nov 30, but somebody moves slow and closing gets delayed to Dec. 1 or later. Can you still get the credit? No! You really must close by Nov. 30. Another good reason to use a Buyer’s Agent!

For a more detailed discussion on this topic, please go to http://solonglandlord.com/achieving-the-dream/first-time-homebuyer-8000-tax-credit.

The fact that a property will be a short sale has to be disclosed in the MLS.  The simplest way to disclose a short sale is to say something like “the sale is contingent on lender approval of a short payoff of the existing loan.”   There are also all sorts of other phrases to disclose this. 

 

What about commissions?  Since lenders frequently try to cut the commission, how does the listing agent deal with that possibility?  If you specify a certain commission to be paid to the agent for the buyer, you will have to pay that amount at closing, unless the buyer’s agent voluntarily lowers their commission.   If you want to be able to adjust the commission, specify in the listing that the commission is subject to the lender’s approval and may be renegotiated.   The listing agent can also specify that the commission to the buyer’s agent will be 50% of the total commission approved by the lender. 

 

Some Realtors feel that the fact that a property will be a short sale should be put in advertising.  There is not enough room in most ads to put in every material fact about the property, so I do not see how that should be required.  You do not have to put all the required disclosure statements in your advertising, so you should not be obligated to say it is a short sale. 

 

Most short sales are sold “as is” because the bank wants to get the amount shown on the closing statement (HUD) that is presented at the time the lender approves the sale.  Since the seller usually has no money, any repair costs would come out of the proceeds of the sale, reducing the payment to the lender.  Do you have to put “as is” in the MLS and the advertising.

To set the proper expectation, you need to disclose that the house is a short sale.  It does not make a pleasant surprise.

 

For a more detailed discussion on this topic, please go to http://shortsalesr.us/short-sale-dos-and-donts/do-disclose-short-sales-in-the-mls-and-advertising/.

In my upcoming book Create a Great Deal, Rule Number 1 is No Hostile Emotions. One of the functions of a real estate agent is to be a shock absorber, to keep the emotions from your client from agitating the other side, or vice versa. You also need to prevent any hostile feelings from poisoning the interaction. When you are negotiating over a home, both the buyers and sellers are under stress. The sellers are giving up what has been the center of their world, and the buyers are trying to establish a new place that will reflect their status, values and ego. At some stage, the personalities of the parties may not mesh and the contentions will create a charged atmosphere. You need to have grace under pressure. Concentrate on the sale and the issues in the sale. Then, try to deal pleasantly with the personalities involved. The personalities are a temporary problem, while buying or selling the house is the long-term result. There are 14 rules to guide your negotiating in my book Create a Great Deal. For further information on this topic, please go to http://createagreatdeal.com/principles/rules/no-hostile-emotions/.

Anyone who buys real estate should consider having the assistance of a real estate agent. This is especially important when you are buying your first home.  Actually, it is almost a necessity for a first time homebuyer, because they have no experience to guide them.  Not being represented by a buyer's agent can cost the first time home buyer a great deal, because errors in judgment can lead to an expensive education.

 

Keep in mind that when a buyer enlists a real estate agent to help buy a property, they are really hiring a real estate firm along with all its agents. Of course, the buyer’s main contact is the specific agent they signed with, though other agents within the firm might help as needed. If a Buyer Agent is hired to represent you, they must promote your best interests; be loyal to you; follow your lawful instructions; provide you with all material facts that could influence your decisions; use reasonable skill, care and diligence; and account for all monies they handle for you.

 

As part of this agreement, a Buyer Agent cannot pass along any confidential information about you to sellers or their agents thereof without your permission, while they represent you.  If you sign a buyer's agency agreement, your agent works for you.  If you do not sign a buyer's agency agreement, the agent works for the seller. 

 

Buyer's agency is an amazing consulting relationship.  The buyers agent has to use every skill available to represent you, dig out all the material facts you might want to know, give you the best advice, and you do not get to pay the agent.

 

For a more detailed discussion on this topic, please go to http://solonglandlord.com/first-time-home-buyer-dos-and-donts/first-time-homebuyers-shouldnt-buy-without-a-buyers-agent.