Tag Archives: seller-paid-fees

Get Creative

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We lost IT. We use to have IT and now we lost IT and now you can get it on ebay! This IT is that huge chunk of our commission that used to come from being the gatekeeper to the multiple. At a listing presentation our competition was only another agent that charged the same fee (there were a few reduced fee offices but it wasn’t a trend).

But they don’t need us anymore for that. They can get it on ebay. And they can get listed for under $400! Of course, taking and uploading the listing in the multiple is just the beginning, but if we’re going to separate out tasks like the actual listing going into the multiple, why not separate out all the tasks and see what they’re really worth. I agree that uploading the listing is a pretty simple task and a lot of agents just fax it in so it probably is only worth $400 (you have to be registered with the mls for this, plus it involves contracts and accuracy of the listing information)….. if that’s all the service a seller wants.

So, last summer I decided to address all of the things that agents do by breaking up the tasks and establishing a monetary value to each. It’s the ala carte menu of listing services and I googled and googled but couldn’t find anyone with anything complete enough online. I even took the coursework to get licensed as a consutant from the National Association of Real Estate Consultants (NAREC) so I could see if someone had already done all that work.

I separated out the tasks ranging from $20/hr for real estate data input, filling flyer boxes, dropping off keys, etc. (a high school kid couldn’t do all of this) to $300/hr for negotiation and problem solving. Wow, I was surprised at how often I worked for $20/hr. I tried to figure out what I’d be charged by different people doing different levels of work and then added a profit margin.

The $300 work i assumed would be done by the senior agent taking the listing and running the team but personally doing tasks that take a lot of experience and skill like price opinions, market timing, the totally important negotiations with both buyers and the buyer’s agents and solving all those problems (I had a list of 88 things that can go wrong with a transaction). Personally, this is where I’d prefer to spend my time.

The results are on the LTDre.com website if you want to see how it works. My slick computer tech even built it to automatically compute based on different packages and house price.

What got me thinking about this was today’s Inman article on bloated commissions and how much I agree with it. The article suggests, “consumers would benefit most from fee-for-service real estate companies that base compensation on flat fees, hourly fees and other specific payments for services rather than relying on a commission rate that is based on a percentage of the sale price of a home.

Agents & Loan Officers to communicate regarding seller-paid closing costs

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(Editor’s note, Tim jumped the gun and posted this article by his wife, Lynlee, before I had a chance to set her up as an author. As soon as I have it set-up, I’ll give her the proper introduction.)

I’m writing this because of numerous problems I have encountered in regards to seller paid closing costs. It has been a trend for buyers to increase the purchase price in exchange for sellers paying buyers’ closing costs by the amount of the price increase. For example, we commonly have transactions where the buyer offers $10,000 more than the listing price and the seller will pay up to $10,000 of the buyer’s closing costs.The financing addendums used in our area specifically indicate that the seller credit may be applied only towards actual closing costs/pre-paids (interest,taxes, HO Dues, etc). The problems that we have encountered occur when the closing costs are less than the amount the seller agreed to contribute.For example, if the seller agreed to pay up to $10K, and the closing costs only come to $8K, then the buyer is looking to get the difference in some manner. Buyers get extremely upset at their agents when they have increased the purchase price by $10K and they are only receiving a credit of $8K. Again, the seller can only pay the actual closing costs.

Suggestions to avoid this problem and reduce obvious tension created by having escrow call the parties involved at the very last minute (which by the way, is usually the day or two before closing):

  • Have the buyer get a good faith estimate from their loan officer BEFORE determining what the seller credit should be.
  • Agents, MAKE CERTAIN that the loan officer knows the amount of the seller credit. If the seller credit will exceed the closing costs, have the difference applied towards a loan discount fee to buy down the interest rate. THIS SHOULD BE DONE WELL IN ADVANCE OF CLOSING DOCS SENT TO ESCROW. (I know many escrow folks may thank us for saying this) 🙂
  • The difference CANNOT be used to reduce the purchase price. This would require the loan to go through underwriting again.
  • Agents need to understand the ramifications of increasing the sales price and having the seller pay for buyer closing costs that may not meet the intent of the parties.

When this problem occurs the common knee-jerk response by the agents to escrow is “why didn’t I hear about this sooner.” Escrow’s response is typically, “we agree.” 🙂

It is always better to “anticipate” problems that can occur and work through issues including being receptive to suggestions by your loan officers and other real estate professionals rather than being “reactionary” when one is in a pickle that is entirely avoidable.

Note: This is general in context and is written primarily for Washington State