My Blog

5 Things Clients may not realize Realtors do to EARN their Commission

5/6/2019

A vast majority of today’s consumers believe that selling real estate is an easy business. Many believe sites like Zillow provide all the information they need to locate the right house and close the transaction. Sadly, both groups are seriously mistaken.

There are three primary reasons consumers hold these beliefs:

  1. The reality TV shows have glamorized the business of showing properties and writing offers without showing the behind-the-scenes work it takes to close a transaction.
  2. Many of the technology companies promote the belief that an algorithm is the only thing needed to help a consumer locate and then close on a property.
  3. The industry as a whole has done a poor job in communicating all the steps required to close a transaction.

What the National Association of Realtors Profile of Buyers and Sellers shows

If locating a property online is so easy, how come 52 percent of buyers named finding the right property as the most important reason they work with an agent? Next in importance was helping buyers with price negotiations (11 percent), and third was handling the paperwork (6 percent).

 

The truth of the matter is that agents earn their commissions at the negotiating table, overcoming transaction problems and coordinating all the service providers required to reach the closing table.

So when asking the Realtor to reduce their commission or say, “I can get my house sold cheaper on the web,” use the list below as a reminder that locating the right house is merely the first step in a very complex closing process.

What it takes to close

The hardest work starts once the property is placed under contract. Below you will find just a few of the many tasks agents complete on behalf of their clients.

So if your thinking that all a Realtor does to close the transaction was to put a sign in the front yard, Think of these things that are required to close a transaction in your area.

  1. Federal, state and local disclosures and requirements

Agents are required to provide all the disclosures mandated at the federal, state and local levels. Here is a partial list of these requirements:

  • Federal
    • Lead-based paint.
    • Flood zones, which often require owners to obtain special insurance.
    • Foreign Investment in Real Property Tax Act (FIRPTA).
  • State (using California as an example)
    • The proper delivery and execution of the agency documentation.
    • Environmental hazards disclosure including asbestos, radon and other dangerous substances.
    • A state version of “FIRPTA.”
    • In brush or other high-risk areas where standard homeowner insurance policies are not available, the agents must coordinate the buyer’s application for the transference of a California “Fair Plan” insurance policy or the issuance of a new policy.
    • “Special Studies Zone” disclosure for active earthquake faults.
    • “Mello Roos” disclosure (used to raise taxes to fund community facilities).
  • Local requirements
    • A municipal inspection report.
    • Any other local requirements by the Municipality to transfer ownership.
    • Smoke and carbon monoxide detectors.
  1. Financing contingencies

Here are just a few of the many challenges real estate agents face and overcome on a daily basis, none of which can be solved by an algorithm.     

  • What happens if the buyer can’t obtain a fixed-rate loan as per the contract?
  • What happens if the appraisal comes in at less than the sales price?
  • What happens when the buyer gets cold feet and uses an interest rate increase as a legitimate reason for cancelling the transaction?
  • What happens when the buyer doesn’t qualify?
  • Any Lender required repairs necessary to close the transaction.  Who is responsible for these repairs?
  1. Inspection contingencies: A case study

Inspections are one of the most important areas where agents earn their commissions. For example, how are incorrect findings by inspectors handled? How are legitimate differences in property condition resolved between professionals such as inspectors and Sellers?

The point here is a savvy agent can save both parties time and money as well as protect them from unscrupulous inspection services.
  1. Coordination of real estate affiliated services

In addition to the tasks above, agents must coordinate the title services, escrow, attorneys and a host of other service providers.

  1. Resolving disputes between the parties

In addition to coordinating all the aspects of the transactions, when disputes arise, the agent is usually the first line of defense for their principal.

Agents know how to work around appraisal problems, title issues, differences in opinion as to who is responsible for repairs, etc.

In fact, up to 95 percent of all transactions have problems severe enough that the parties believe the transaction won’t close. 90% do close with less than 1 percent with litigation — why? Because the agents involved successfully negotiated the dispute to the parties’ satisfaction.


Article by Inman News - 4/2019

Article image credited to John Schnobrich

How much Buying Power do you have as a Potential Buyer

4/14/2019
Thinking of buying a home?  Worried your offer won't get accepted?  Check out what's makes a buyer a strong candidate when facing a multiple offer situation.  This is also true for non-competitive situations on why a seller would consider your offer.  It's a competitive market and you should consider every advantage you can get.

Buying Power Checklist (In no specific order)

0-6 Checks = Low Buying Power.  Buyers in this bracket can expect to lose out on several homes, write several offers and possibly "overpay" for a home.

7-14 Checks = Average Buying Power.  Buyers in this racket can expect to have a good chance of getting their offer accepted without losing out on too many homes.  You may be asked to add a few items to your offer to increase its strength to help get you offer accepted.

15-21 Checks = High Buying Power.  Buyers in this bracket have a high chance of getting their offer accepted. In most cases, your offer will be in the top 2 or 3 that the seller has to choose from.


How many checks do you have?



For more details or questions about any of these items give me a call Steven Melchor a.k.a. Melch 810.513.1561.  We can see what you can do to make your offer stronger!!

For Sale By Owner vs. Real Estate Agent - Which is more Profitable?

3/18/2019
Thinking of selling your home yourself?  Somethings to think of before you go that route.

- Do you have a list of potential buyers ready to view your home?
- Do you have time to show the home and let strangers into your home?  Sometimes alone?
- Are you versed in the local trends on the housing market and know the latest regulations for closing a sale?
- Do you have a lot of extra time to market your home and do all the work to meet and greet properly?


Most Sellers don't realize that they can get 8% to 10% more by listing with an agent which is more than the standard 6% Agents get split between two agents.

The attached articles outline this in detail and show that it's a downward trend to go solo

Dangers of FSBO

3 Facts you need to know - Realtor vs. FSBO

Going Solo is not always the most profitable

https://magazine.realtor/daily-news/2018/11/12/fsbo-transactions-hit-new-record-low

What's Up With Zillow?

3/15/2019
What's up with Zillow and the "Zestimates"!

With the way the market is today, clients have been hammering about Zillow "Zestimates" and why (mostly on higher end homes) their home values are over inflated or even worse highly undervalued.  It's very frustrating and frightening to some sellers to the point that they don't want to sell their home.

Well we've compiled some information that you may be interested in.  Some are actual Zillow quotes, data and explanation of their process.  Zillow is undervaluing homes on a regular basis.

First off, what is a Zestimate:
    A: A 'Zestimate' is Zillow's estimated market value of a property.  They ill it as "a starting point in figuring out the true value of a home."  It is calculated using public data, which may or may not be accurate, updated or relevant to your neighborhood or community.  Zillow freely admits that these Zestimates are 'estimates only' meant to be starting points in buyer research, because they typically do not accurately reflect a homes actual value.  "Our data shows that half of all sales are generally above the Zestimate," from Zillow.com.

How accurate is it for Michigan?
   A: Zillow calculates how 'accurate' they etheir Zestimates to be across the country, based on the quality of the source information available to them.
           - Michigan: Zillow estimates that their Michigan data is a 3 out of 4 stars, or 'Good Zestimate'.  3 out of 4, or essentially roughly 75% accuracy!
                 * 35% of homes within 5% of sales price
                 * 60% of homes within 10% of sales price
                 * 77% of homes within 20% of sales price
                 * That leaves 23% of all properties selling for more than 20% higher of lower than the Zestimate.  This can represent tens of thousands of dollars difference from actual value!

Zestimates for properties could be represented significantly lower, or significantly higher than the actual values.  And they are not updated regularly or quickly with recent sales - so in fast selling markets, Zillow's Zestimates tend to not accurately reflect recently sold comparable properties that would positively impact home values.

Also, Zillow does not calculate the value of properties based on what local residents understand to be neighborhoods or communities.  Instead, Zillow calculates by county level data, as they do not have the ability to identify local boundaries.  This is frequently leads to homes in specific neighborhoods to be 'undervalued' due to average sale prices of homes throughout the county.  This means if you are on Lakefront property you could be compared to non-Lakefront property so your value is undervalued.

Can the Zestimate be removed:
   A: No.  Zillow will not remove the Zestimate from any of its listings!  What's up with that?

Can the Zestimate be updated?
   A: Possibly.  Zillow does permit homeowners to modify criteria about their home that 'may' improve the home's Zestimate Value by 'Claiming' their home.  To claim your home and update data regarding beds, baths, square footage, lot size, heat source, etc, click here.

For more detailed information, feel free to check out Zillow's 'What is a Zestimate' page, found here.

Three New Yearís Homebuyer Resolutions

2/20/2017

This is the year you become a homeowner! To make the most of this most important step in your life, make these three New Year’s home buying resolutions now.

1. I will check and repair my credit. Before you start shopping for homes, make sure you have no errors or unresolved credit issues that could prevent you from getting a good loan.
 
The three credit reporting bureaus, Experian, Transunion and Equifax, don’t share data, nor do they correct errors without evidence. Order a full credit report from all three bureaus here. If you find an error, contact the appropriate bureau and mail copies of your payment, release of lien or other proof.
2. I will get preapproved for a mortgage loan. Take two to four months of bank statements, pay stubs, and an account of your monthly debts and expenses to your lender. The lender calculates how much money you can safely borrow and at what interest rate.
 
Preapproval also means a lot to sellers. It show’s that you’re serious about buying a home and that the closing process will be quicker and smoother because you already have a lender.
3. I will buy within my means. It’s sensible to buy the most home you can afford, and your lender will help you get there, but it’s not wise to get a risky adjustable rate mortgage so you can buy more house. Being “house poor” means having no money available for other things in life, so stick to conforming loan guidelines to be safer financially.

Clutter-free Countertops

2/13/2017

Today's kitchens are filled with all kinds of gastronomical gadgets, but if you want to show your kitchen to its fullest advantage, here are five ways to keep clutter down:

  1. Store unused equipment. Which appliances do you use the most? Chances are they’re not vegetable curlers or pasta makers. Store those appliances somewhere else, such as a butler’s pantry, food pantry or the garage.
  2. Build an appliance garage. Many cabinetmakers offer an appliance garage that can be closed when not in use. You can also customize an appliance garage to extend the length of the counter.
  3. Update appliances. If you need a microwave, get one that’s also a convection oven. Commercial-grade mixers have attachments that can make pasta and knead bread. The newest coffee machines can make tea, hot chocolate and all kinds of coffee shop specialty brews.
  4. Mount what you can. Under cabinet mounting is easy to install. Paper towel racks, electric can openers, and task lighting can all be mounted under the cabinets to free up counter space. Throw out smelly dishrags and sponges, and store fresh cleaning aids in caddies under the sink.
  5. Invest in organizers. Corner cabinets can be better utilized with swing out organizers. Drawers on rollers allow better access to all your storage. One charging station should serve multiple devices. Try installing one in the hall or utility room.

Once your kitchen is better organized, you’ll find it easier to prepare for showings and buyers will have an easier time seeing the kitchen’s best features.

Should You Pay Discount Points?

2/6/2017

The low mortgage interest rates that you find online or in the newspaper aren’t necessarily what you’ll pay when you apply for a loan. Why? Because banks will charge you “discount” points to get the best rate, which adds to the cost of the loan.

Points, or discount points, are expressed as a percentage of the loan amount. The point "discounts" the interest rate, that's why it's referred to as a discount point. If your mortgage is $300,000, then one "point" is $3,000. For each point you pay, your interest rate should be reduced by about ¼ percent.

On a 30-year mortgage loan at $300,000 and 5.00%, the monthly payment works to $1,610 without any points.Paying one point ($3,000) would reduce the rate to 4.75%, making your discounted payment $1,564 per month.

That's a reduction of $46.00 per month. Now weigh the cost of $3,000. To get that, divide $46 into $3000. The result is 65. It will take you 65 payments to break even, nearly 5 ½ years. It’s worth it if you’re planning to stay in your home for 5 to 10 years or longer. If not, you’re far better off using the $3,000 to pay down your loan principal or buying furniture for your home.

There’s another way to get the best mortgage interest rate – that’s to have the best credit scores possible. Those with near or perfect credit are considered low risk by banks. As always, consult your financial advisor for more information about home loans.

Countertop Pros And Cons: What To Choose And Why

2/2/2017

Wondering how to choose a countertop for your kitchen? With so much to pick from, it can be challenging - especially with changing trends and so many options that are at similar price points. This pro and con list should help.

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Houzz TV: Letís Go Island Hopping

2/1/2017

Always a popular gathering space, the kitchen island plays a vital role for many households. From stools to countertops to lighting above, the possible combinations are endless. Here’s a collection of some of our favorite kitchen islands with plenty of decorating inspiration.

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