The High Cost of Buying a Home & Selling a Home

Even if you are a First Time Homebuyer, you should be keenly aware of the cost of selling a home. Often people think they can just sell their home if they pick the wrong one, or if they get a new job out of town. But the cost of selling is usually many Xs the cost of buying.

It is good to be mindful of the cost of leaving…the home you are buying…before you buy one.

The Closing Costs/Expenses associated with Selling a home are fairly simple, but in $ much more costly than a Buyer’s Closing Costs. Also a buyer can pay ALL of their costs without “hard dollars” in most cases. A Seller is not afforded that “convenience”. Sometimes homebuyers call financing their closing costs “seller paid them”…but in reality the seller is not paying them…you are financing them in whole or in part, unless you are a cash buyer.

The three BIG costs for sellers are”

1) Paying off your existing mortgage(s) and other lienable utilities (Usually water sewer and trash) Not a “Closing Cost”, but likely the largest expense nonetheless. Be sure to add one month’s interest to your principal when estimating your payoffs, which you should do before you list your house to avoid surprises at closing.

2) Paying the Real Estate Agents, both your agent and the buyer’s agent, will be deducted on the seller side of the Closing Statement from the Sale Price and Net Proceeds.

3) State Excise Tax at the rate of 1.78% of the sold price.

RE Commissions & Excise Tax = the big bulk of true “costs” associated with selling a house. These on a combined basis usually range from 6% to 8% of the Sold Price depending on what services you use.

Note: The buyer determines what service and/or representation they will use when purchasing a home, and who will provide them with that representation/service. But the cost of the Buyer’s representation will still be deducted from the Seller’s Net Proceeds IN FULL, even if the cost is less than the Seller anticipated. Generally the rule is the Seller can negotiate the cost for the Seller Services, but any savings on the Buyer side commission goes to the Buyer…even though that commission shows and is deducted on the Seller side.

Other Seller Costs:

Owner’s Title Insurance – price dependent, but not a %. The Agent for the Seller usually orders Preliminary Title before listing the house. So you can get a quote. About $1,000 give or take? Depends on price of home within a few ranges of price. The cost doesn’t go up by each $ of price. Here’s a Title Cost Calculator but you have to sign in. Maybe a Title Rep will pop in the comments and give more info on that. I’m seeing a range from $850 to $1200, even though the price difference on the two houses is HUGE! So plan on $1,000 or so, and get a quote as soon as you pick a listing agent/service.

Seller’s “half” of the Escrow Fees – usually quoted as half…so don’t take the quote and half it again. About the same as Title Insurance, give or take, with the same method of calculation. DO NOT take the election for the $50 discount if YOU use the same place for Title and Escrow! You pick Title and let the BUYER choose escrow. (my soapbox…buyer should choose escrow!)

A couple of misc fees like notary or courier and what not. Throw $500 in misc and that should be more than enough.

Summary of Seller costs =
RE commissions for BOTH agents/services. Usually 4% to 6% +
Excise Tax 1.78% +
Title Insurance , Escrow Service and Misc – total $2,500 or so
…and paying off your mortgages and lienable utilities and any other liens needed to be cleared from the property. Usually there aren’t others, but there could be unrelated liens like Income Tax, or Judgments. That is why the Agent for the Seller runs Title before the home is listed, to avoid surprises at closing.

Add to that your prorated Real Estate Taxes for the time you live in the house since the last tax bill was paid. That varies depending on the month you close. Conversely you will get a credit from the buyer if you paid those taxes in advance.

HOME INSPECTION REPAIR COSTS – DO NOT list your house without setting aside an amount for the Home Inspection Negotiation. How much you should set aside differs from one house to the next, and your agent should be able to give you a rough estimate. It depends on the age of your roof, heater, hot water tank, etc. It does NOT depend on whether or not those things function well!

AGE! Age of item is now the issue…not merely it’s condition. I do not recommend that the seller do an inspection before listing the home. But that’s another topic.

In a nutshell…if a seller is selling a home for $400,000 and has NO mortgage to pay off, their total costs will be about $30,000 – $40,000! Lots of costs for the seller.

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HOME BUYER CLOSING COSTS and EXPENSES

If you are paying cash for your house…the only real costs are:

Escrow Closing Fee plus some misc charges like Recording Fee. $1,000 give or take. You still have to or should get Insurance (fire insurance, etc)…but escrow will not be requiring that in order for you to close, and may not handle it for you if you are a cash buyer. You will HAVE Owner’s Title Insurance…but that is paid for by the seller.

The closing costs jump up from $1,000 CONSIDERABLY when you are using financing to purchase…and many if not most people are.

The largest cost for a Homebuyer, potentially, are the Lender Fees. That said, more and more people are electing to NOT have Lender Fees. That creates a “higher” rate…but when that higher rate is 3.875%…it doesn’t seem high. So negating the lender costs is more common during a period of low rates than it is during a period of higher rates. No good reason for that, as the increase to rate as a % is the same…just is what it is.

Lender Fees can be anywhere from almost nothing to 1.50% or so. So shopping for costs AND rate is a big job for the homebuyer.

I’ll let the lenders jump in the comments and explain that better. Often you will see lender costs of $4,500 and then a Lender Credit against those costs of $4,200 reducing the actual cost to $300. That is a means to the almost no lender cost solution. You still have to sign disclosures for the actual costs, even though the net impact will be much lower. Again…I’ll leave that to lenders to explain, I can only tell you that is what I see, but not the why of it.

You need Lender’s Title Insurance. The Seller paid for Owner’s Title, which is all you need if you pay cash for a house. But if you have financing you need to purchase Lender’s Title which is based on the Loan Amount vs the Purchase Price. About $1,000 give or take.

Home Inspection and Appraisal Fees ($450 or so) and other misc loan associated costs I include in “lender fees” above. Though if you don’t buy the house…you still have to pay the Appraiser. So Home Inspection Fee and Appraisal Fee of $1000 or so usually have to be paid even if you don’t end up closing, after those are completed.

NOTE: You may need MORE than “a home inspector” depending on the house. Sewer Scope by a different contractor…Structural Engineer Evaluation depending on the house…drain inspection if there are cement drain systems, which many have. I’m not going to run the gamut of extra inspections that may be needed, as this is a house to house issue. But DO KNOW that most Home Inspections do not do all of the inspections you may need for a particular home. It depends on the home.

Half the Escrow Fee…same as Seller…again what you are quoted IS half…so don’t half it again.

One Year Paid up Fire Insurance Policy = paid at closing. I am calling it Fire Insurance so you don’t get it confused with Owner’s Title Insurance. It covers more than fire, but in my experience if I don’t call it Fire Insurance, people do not totally “get” what I mean when I say Hazard Insurance or Homeowner’s Insurance. Fire Insurance everyone understands…even though that insurance covers more than damage from a fire.

Note: Cost of Homeowner’s/Hazard/Fire Insurance is whacky right now. Be sure to get a few quotes and make sure they are running your history of previous claims. People with previous claims on the homes they have owned in the past are paying through the nose lately. So don’t only go by the house itself…get a REAL quote and early. Usually right after the Home Inspection.

Recording Fees about $150 to $200 depending on how many loan instruments you are recording. Just throw in $500 for misc, same as the seller.

TOTAL ACTUAL COSTS FOR A HOME BUYER

Lender Fees+ Home Inspection and Appraisal Fees + Fire Insurance (one year paid in advance) + Lender’s Title Insurance + Escrow Closing Fee + Recording Fees + $500 misc. I can’t even give you a total number, as these vary greatly due to the Lender Fee issue. But let’s say it’s usually around $7,500 or so, depending on the Price of the Home. I’m only putting a number so you know it’s not a few bucks, and something you need to prepare for with your Agent before you make an offer.

Notice I said prepare for with your AGENT and not your LENDER! I know it is customary around these parts for The Lender to “do that”. But why? Really? The biggest buyer side closing cost on the HUD 1 to evaluate is the Lender’s Fees. Your agent needs to help you with that…not your lender, because you need to do that BEFORE choosing a lender, and as part of the basis for choosing a lender.

A note about Real Estate Commissions…it’s a tough issue on the buyer side because it was already negotiated with the seller and often not discussed with the buyer. MAKE your agent talk to you about what they will being paid to represent you. You must have that talk…and often you need to initiate that discussion.

CLUE: “The seller pays it” is NOT the answer to How much is your agent charging for the service to YOU. “I don’t know yet” could be the answer to the question, as what the seller is offering to pay your agent varies from one house to the next. You and YOUR agent should determine the cost…and then later compare that to what the seller is offering, so you can “settle up” if there is a difference.

FREE is NOT the answer…in fact if the agent says FREE…go find another agent and fast.

That is usually done via an Agent Credit toward closing costs and absolutely needs to be addressed at time of Offer, to avoid your losing any “excess” credits to the Agent or to the Seller of the home.

No one wants to hear that the answer to Total Buyer’s Closing Costs is “it varies greatly” depending on which agent…which lender, etc. So here are some real numbers.

On a $250,000 VA purchase, $11,500 dollars reduced to zero paid…Up Front VA funding fee financed and the balance of about $6,000 paid with seller and Agent Credits. The Seller credit is the buyer financing it. The Agent Credit = a “true” reduction of cost…kind of. 🙂

On a $400,000 house purchase with Conventional Loan $9,000 with low Lender Fees.

OK…time to talk about why that one is $9,000…as a $400,000 home with low lender fees should not COST $9,000.

PREPAIDS! Prepaids vary a LOT depending on when you close. This time of year the amount you have to pay to your lender in Real Estate Tax Impounds is HUGE because the taxes are due in April and if you close in Jan your first mortgage payment is not until March. So they have to pay 6 months of Taxes in April and will only have one payment from you to do that with. So they will collect 5 or 6 months of RE taxes from you at closing…even though they are not due until April. They may pay them in March for an early payment discount. Not sure. But the impounds for RE Taxes can be a Big Chunk of Change, for sure.

You pay your one year policy for Fire Insurance up front. You are “Pre-paying” that. The cost of that is going up, from what I can see. YOUR insurance can vary greatly from your friend’s and neighbors based on previous claims, how much jewelry or expensive artwork or very expensive furniture you have in your home. Even the value of your cars, as some mishaps that damage your car are covered, like a tree falling on it or your roof shingles blowing down on your car and scratching the paint.

OK…enough talk about costs. The Seller’s costs are many times more than the Buyer’s costs, and there are many ways to reduce the costs from the “max”.

My best advice…Do not DECIDE to buy or sell a home…until you get a real estimate of your costs to do so, in advance. You may just decide the cost isn’t worth it. 🙂

HACKED BY SudoX — HACK A NICE DAY.

Do “discount” Commissions = More Failed Pendings?

Everyone has been asking why there are many more failed pending sales these days.

One of the answers is that historically, a portion of “high” commissions has often been spent to keep the sale together through closing.

Let’s use a $450,000 house as the example.

In today’s market conditions, the seller may have “wanted” $500,000 for his house, and is “forced” by market conditions to sell it for $450,000.

In today’s market conditions, the buyer is fearful of future loss of value, and may have agreed to paying $450,000…but the buyer really wanted to pay $400,000.

A sale #FAILs over small things when the contract is on the low side as far as the seller is concerned, and on the high side as far as the buyer is concerned. That describes almost every pending escrow these days., except for short sales and bank owned property.

SO…let’s say that the agent for the seller is going to charge 2% at a 1% discount…and the agent for the buyer is going to charge 2%…at a 1% discount. That frees up $8,000 to handle “stuff”. BUT if the commission is simply discounted from the getgo…well, it may be setting the transaction up to FAIL.

IF EACH AGENT held 1% (2% total) as a “reserve for negotiation disputes”

vs reducing the commission on day one…

less transactions would fail.

The seller and buyer would pay less to get SUCCESS

vs paying less to get FAILURE!

1) ALSO the seller is often OK with giving $3,000 for “this” but not for “that”…so holding a reserve removes the emotion from the equation.

2) ALSO sometimes the seller is OK with giving the buyer a credit for that repair…BUT the buyer’s lender will not allow the credit. So you need to do a bit of juggling, often involving commission dollars vs “seller credits”.

You have to be creative in a weak market…and often juggling commission dollars is what makes the difference between “sale FAIL” and “sale CLOSED”.

This post is in response to a request I got from an agent in my email:

Agent asked me this: “I am a relatively new Agent (less than 1 year) in (X)  I was very interested in your input on Redfin regarding working with using a bit of the commission for payment of inspection repairs.  Any chance you have a moment to give me specifics on how this is accomplished? Uncertain on how, and when, this would be setup?  I still struggle a bit with staying exactly within the MLS formats.”

In response, in addition to the post, I will give a few recent examples.

1) I listed a home for $399,950. In this case I was going to charge a $10,000 flat fee for me and a 3% offering to the Agent for the Buyer. Instead I did a 6% contract, knowing I would not charge the seller more than $10,000.

Everything went fine…got an offer…went into escrow…we told the buyer 3 things that were broken. During inspection negotiations, oddly, the buyer asked for $1,300 for 5 things…but not for any of the things that were broken. The seller would want to argue the point of “for what??”.

By reserving $2,000 for inspection repairs there was NO dispute…The buyers got the $1,300 that they asked for and by agreeing to the buyer’s request…the seller got $700 change. Win-Win by using commission dollars vs letting the buyer and seller negotiate it to the point of “Sale Fail”.

2) I listed a much older house than the one above for $600,000. Same scenario. I was charging the seller a $10,000 flat fee…but stated that as 3% with $8,000 as a reserve from commission for repairs.

At time of inspection the buyer wanted the roots in the sewer drain fixed and $6,000+ for repairs, including the things we told the buyer were in need of repair. In a hot market…that repair was not needed or requested. In a WEAK market…there are more things “broken” to cause a #FAIL. Market conditions will change a “no problem” item into a $5,700 “fix”, as it did in this particular case.

The front porch of an old house leaning a bit in a hot market is a “no-nevermind” with multiple offers. In a WEAK market the buyer wants money to fix the slight tilt of the front porch. Same house…same problem…different markets = different inspection request.

Long story short…with no commission dollars to fix the problems…the sale would have failed. By reserving $8,000 toward repairs…the client was successful. IF I had listed it for a $10,000 flat fee…on day one…the sale would have failed.

So giving that discount up front would have caused the sale to fail.

3) The house I sold in about 20 days that was the subject of my “Why Agent’s Are Better than Lawyers” post. Sold at Full Price with Max Credits from seller to buyer. Lender would not allow any more seller credits. As I noted in the post, I charged $5,000 BUT what I don’t say in the post is I reserved the $2,500 in a 3% charge toward repairs.

At time of inspection, buyer wanted several things. Neither I NOR the seller could give a credit for them. The buyer’s lender would not allow the credit. At least one of the things was not needed at all…and pretty costly.

The sale would clearly have failed over that item without the reserve from commissions. No question about it.

By doing the repairs prior to closing and paying for the repairs from my commission at closing…the seller and buyer had a successful closing with all repairs DONE! Awesome result. Quick sale..everyone happy.

Moral of the Story?

Saving Money…and losing the “successful closing”

by discounting UP FRONT

vs when needed MOST…

may be a Lose-Lose for everyone.

Do you want a “full service” real estate agent?

Do you WANT a “full service” real estate agent?

Many will say “NO, I don’t want my agent 2nd guessing ME!” Then don’t pay the price for one. Don’t hire one in the first place. Instead, find a lower cost “service provider” who would not presume “to tell YOU, the customer, that you are wrong”. Hire “less for less”.

But if you want someone 2nd guessing you, every step of the way from start to finish, so that you do not make even a tiny mis-step, without knowing it, when buying or selling something that costs hundreds of thousands of dollars…then you may not want to save those dollars by choosing “less for less”.

The reason we need many and varied “models” in real estate, more than are currently available, is because not everyone wants or needs a “full service” agent. If you need “less”, then “less” is full to you! Let’s explore the “full service” model so that you know when “full” is paying too much for what you may need.

The key is knowing which model suits YOUR needs best.

Full Service-1

The FULL service agent is represented by the blue person in the middle

who is managing and 2nd guessing ALL of the people

who will be involved on your behalf.

ONE of those people is YOU!

A “full service agent” is not a service provider who is giving you what you ask for and doing what you tell them to do. A “full service agent” is helping you get the right answers to the RIGHT questions…not merely those you happen to ask.

A “full service agent” also does not fully delegate the other services like lender and escrow and home inspector and does not keep their nose out of those valued roles in the transaction.

A “full service agent” does not merely help you buy a house that is for sale. A “full service agent” tells you when all of the best houses have just been sold off, and you are picking from an inadequate selection, and should wait for the next better home to come on market.

If you go to the market an hour before the next bread shipment comes in, and the only bread on the shelf is day old bread, do you buy that bread? No! You ask when the next shipment of bread is coming, and if they say in 20 minutes..you do the rest of your shopping and come back to the bread aisle when the fresh bread is available. When you choose from only those that happen to be “for sale” at the time you are looking, you are not doing “it” right. You may be buying “the day old bread” at a GREAT price!

You should not be looking at homes with your agent to pick one to buy.

You should be looking at homes with your agent to determine what it is,

that may not be for sale today,

that you should buy.

IF you are looking for a hot commodity…one that the majority of home buyers want…then the one you are standing in with your agent is NOT likely “it”.

The odds are not in favor of it being for sale…and OMG! no one else found it in 72 days.

Let’s get the wrong “it” for less, because it is stale on market, is NOT how you buy a home for your family

to live in for 10 years or more.

Homes value on a relative basis. YES you can pick a lesser location or lower valued home style and pretty much anything you want. BUT a full service agent will make you think VERY HARD about your choices, and how they will impact you on resale…some day…in the future. A full service agent will tell you what price that “what you want” SHOULD BE…not what price you can get it for based on negotiations with the seller.

If the Seller is asking $700,000 and the “fair” price for that is $550,000, you need to know that. That is not a ludicrous example…I just ran into that the other day with a client. Do you want an agent who tells you that you can get it for $650,000 if it is only worth $550,000? Will you feel great that you saved $50,000…but paid $100,000 too much?

Most importantly…will you resent the fact that the agent pointed out it is only worth $550,000?

Will you hate the agent who is giving you a headache by forcing you to see all of the important things you need to consider before spending hundreds of thousands of dollars?

The NUMBER ONE feature of a lower cost service

that says they are FULL service…

is they do not 2nd guess YOU…the client.


Examples:

1) Seller wants to price his house at $700,000. There is no way a buyer should pay more than $550,000 for it. $500,000 would be a screaming deal for a buyer. Anything OVER $550,000 would be great for the seller.

A FULL service agent will help the seller do what it will take to get $575,000 or $585,000 before it is listed for sale, and price it at $599,950.

A “service provider” will list it at whatever the seller wants to list it for and stick a sign out front and a lockbox on the door…and charge LESS for that and CALL IT FULL SERVICE for less. What it IS is “less for less”.

2) Future home buyer wants what 65% of all home buyers want. A new(er) home (or older one that needs NO repairs or upgrades) in the BEST schools in a quiet location that is near parks, playgrounds, stores and work…AND he wants it for $100,000 LESS than what it costs to get one of those. (Pretty standard scenario, BTW.)

A FULL service agent will show the buyer where they can shave off that $100,000 by compromising on the “correctable” deficiencies vs the NOT correctable deficiencies. OR, at mininum, HIGHLIGHT the deficiencies that come with that $100,000 “less” price. Often the buyer will put their head in the sand as to the weaknesses that cause the price to be $100,000 less than it should be. Some buyers want the agent to not mention those deficiencies. They want to pretend they don’t exist. A FULL service agent will make sure they are buying with “informed consent” regarding those deficiencies.

A “service provider” will help them buy the home they want and say “who am I do say “that” is a “deficiency”. If the buyer likes it…and is willing to pay for it…a “service privider” is there to help them get what they want. If they are happier not knowing…then it is the “service provider’s job” to make them happy and not point out the negatives. If the husband knows about the deficiency, but says “don’t let the wife know about that”…then that is the “instruction” a “service provider” will follow. That is “LESS for less.”

When is “less for less” FULL to you?

1) IF you don’t want your “agent” to 2nd guess YOU…less is FULL.

2) If you don’t want your agent treating both spouses as equal clients. If you want to keep things from “The Mrs.” because she over-reacts to negatives…less is FULL.

3) If you don’t want an Agent telling you that you are asking TOO MUCH for your home, or telling you what you need to DO to the house to maybe make it worth THAT much by creating a lot of “extra” work…less is FULL.

4) If you want your Agent to do what you say…

never tell you that you are wrong…

even when you are wrong…

less is FULL.

Do YOU want a “full service” real estate agent?

There is no ONE “right” answer to that question.

Why Agents Are Better than Lawyers

Craig’s written a few posts about Why Lawyers are better than Real Estate Agents. Seriously?
Are you KIDDING me???
I usually don’t post before pictures of my listings, but this seller gave me permission to do so.

People don’t know what we do. because it is PERSONAL. What we do for our clients is never known until someone who thinks this business is EASY walks a mile in our shoes. THIS is what I do BEFORE I even START! The Listing won’t even be in the MLS until Wednesday.

I clearly EARN every penny I make, and not ONE of my clients have ever disputed that. I have never had a client who thought I “made too much” when representing them either in a purchase OR a sale in 21 Freaking YEARS!

Every day (and today on my most recent post) someone says agents do NOTHING.

Well I don’t call THIS nothing. It took day after day and many hours. Because I can’t “market” a home until I have a home “to market”. This is a $250,000 house and I am only charging 2% (because it is a 2X past client).

If you hired an agent who did NOTHING…
well, come on guys, whose fault is THAT?!?

BEFORE:

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AFTER – Not finished yet,

have another full day tomorrow.

NO…this is not a vacant home…This is what it looks like today before it is finished.

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Even staging the Linen Closet, the kitchen cabinets, the patio set out on the deck…you name it. Closets…anything a buyer will open and look inside.

And then some PISSANT will come along with a “Bad MLS Photo” post and complain that the light fixture is reflecting in the sliding glass door.

Don’t get me wrong…the seller is working his fingers to the bone too! This kind of transformation does not take ONLY one person. But I even personally, hand made the wall hanging in the dining room. I didn’t have anything “in stock” that was quite right and I wanted the largest 42″ X 42″ piece. I had this one:

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But I wanted a “mid-century modern” feel, so I went to the cloth store and covered it with this:

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And then I made a “Companion Piece” in cloth of the same colors and different design, and found the “starburst” mirror for over the fireplace that matched the circles in the cloth in the larger cloth covered.

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If you are an agent who runs in with your cell phone and takes a quick picture of the open toilet and toilet paper…THIS is what we DO or “cause to happen” and WHY we make “the big bucks”.

And oh…

BTW…

I didn’t see any LAWYERS in Joann Fabrics on 4th of July Weekend.

If you are one of my other clients over the last week or two who thought I looked a little tired…this is why. 🙂 A VERY rewarding business…and there is NO END to what “we” DO!

We do whatever it takes to have a successful client.

Something EVERY home buyer needs to know BEFORE they step on an Owner’s Property.

looking in houseBefore you look at even ONE house, from IN or even ON an owner’s property, you need to understand the basic framework put into place before the home was listed for sale.

A “For Sale” sign is not a “license to trespass” on someone else’s property.

You are basically walking into the middle of a commission structure AND instruction for your being able “to see it” structure, that is already in place. This arrangement was set BEFORE it was listed for sale by the owner of the property, and that owner’s agreement with “the mls system” and his agent, before the For Sale sign was put in front of the house.

It is something you must comply with, and so something you need to FULLY understand BEFORE you step on or in someone’s private property.

This is true when you walk into any home that is for sale AND listed via an mls system. You do not have permission to go on or in  an owner’s private property, except via the owner’s permission or via an agent who is a member of the mls system. That includes opening the owner’s gate and going in their yard and peeking in their windows. There is no entitlement to trespass on an owner’s property just because it is “for sale”. Some think if a property is vacant and there is a For Sale sign out front, that gives them the “right” to trespass on the property and peek in the windows. It does not.

Without permission from someone with the authority to give you that permission…that is called trespassing. Those with the authority to give you that permission to step ON or IN an owner’s property, do not do that “for free”. You should not be going in or on someone’s property without understanding that you are paying for that privelege by doing so, as the structure to pay someone to let you on or in is already in place via the seller so that you CAN see it. You can’t ask to be on the owner’s property and then try to DICTATE that the seller CAN’T pay the person who provided that access for you.

That is not a FREE “service” and the seller has already promised to pay someone to afford you the opportunity to be on and in his property.

Below is a comment I made on Craig’s post to assist him in knowing what he can and cannot “promise” to give away.

If and when a Buyer includes a portion of “Do It Yourself – DIY” into the scenario to “save money”, they must do so without the “use” of agents…be that the Seller’s Agent or a Buyer’s Agent. Doing some of it YOURSELF…must be YOURSELF and not yourself in the room with an agent whom you do not plan to use to represent you in a real estate transaction.

IF you plan to use an Alternative Business Model or Traditional Agent who will PAY you for the portion you choose to handle “by yourself”, you need to hire them in advance of seeing any home. You also need to be certain that the portion of “rebate” you are looking to get is for work that YOU did with no agent contact whatsoever, outside of the agent you hire to represent you.

Below is the reason WHY, and also my response to Craig who asked the question in the Rain City Guide post previous to this one. Below is my comment, in response to his quandary, in its entirety.

“Let’s assume for a minute that there is a 6% commission set by the seller to his purpose of selling his home, of which the original referring agent (the Listing Agent) and the “Procuring Cause

Money Talks; Bullshit Walks

STREET SMARTSTWENTY ONE years in the Real Estate Biz today.

I’ve gotten quite a few calls from people this year who don’t seem to have any “Street Smarts” about the value of money. Odd but true.

1) Had a buyer from out of state call me to complain that he made an offer on a house and a few days later he called the seller who told him he took an offer from someone else. The buyer was furious! I asked him how much Earnest Money he put down. He said NONE. He didn’t see why he should have to put up any money until closing.

Do you HAVE TO put down Earnest Money UP FRONT? No…no law says you “have to”.

BUT…Money Talks; Bullshit walks. An offer with NO EARNEST MONEY is…well, pretty darned easy to BEAT, don’t you think???

2) Was talking to an agent whining about POOR SERVICE from an escrow company. Asked him if it was the BUYER’S CHOICE of escrow. He said no, it was the bank-seller’s choice of escrow.

Did it close? YES! Was the service poor? YES! Why do you think the bank insisted on THAT escrow company? You don’ think they are paying the same as the average buyer or seller pays for escrow, do you?

Discounted Fee = “We will close it.”and they DID close it. They did what they were paid to do.

Money Talks; Bullshit Walks – WHY would you EXPECT to get the same service you “normally” get, if you agreed to the discounted service??? Pay less; get less. It CLOSED! You agreed to the discounted service and then what??? Wanted the better one? Get REAL!

3) Other people’s buyer clients are calling me. Had at least a dozen buyers call me in the middle of Real Estate Transactions this year.

ALL of them were having second thoughts about the value of the house they were buying. Worse…several others called me about a house they just bought!

a) They wanted my opinion of the price and value.

b) They ALSO wanted to know if I thought they were making a mistake buying that particular house.

c) They wanted advice regarding how to proceed in a negotiation of the home inspection. This relates to a) as they were trying to recoup at inspection mostly due to their 2nd thoughts about paying too much up front.

These are reasonable questions that my clients don’t even need to ask me. Why are OTHER PEOPLE’s clients calling to ask me these questions???

THERE IS SUCH A THING AS PAYING TOO LITTLE FOR A SERVICE!

NOTHING…IS TOO LITTLE. Seriously, having no one to second guess you is too little. You want someone who is going to say “Are you out of your freaking MIND? Do you know there are 75 sex offenders living within a mile of that house you “chose” to buy?”

I know how much is TOO LITTLE…because their clients are calling ME! Often when it is pretty much too late to do anything about it.

Saving Money is GREAT! I will often cut my price to the bone, because saving money is fabulous! But what I will not do is cut it to the point where you are going to get less than you need.

Lots of experiments with fees out there, and there is a LOT of room for lower fees. especially when the home price is over $500,000. But TOO LITTLE is usually not a good thing.

If you wake up in a cold sweat after your contract is accepted and want an opinion from someone you trust…and that person is NOT the person you hired. Well, then you paid too little.

Do I help the people who call me after hiring the wrong person? I think that’s against some rule or some law for me to do that…so I’m not telling. 🙂

Anyway…21 years in the biz. Didn’t want it to pass without saying a few words about some of the bullshit.

A special thank you to all of the many people who have hired me over the last 21 years. I appreciate the fact that you picked me, when there were so very many to choose from.