We know that we have the best kept secret in real estate (maybe even beyond real estate). We are no longer hiding it. We want everyone to know what it is we do. I mean people know our signs, they see us all over but do they truly know what we do?
The most common question we answer on the phone is "So how do you work?". Well now you can find out as easy as watching a video. In under 7 minutes you will know just that, how we work. There is no magic to this thing called real estate, but there are some keys to it working. We have them all covered.
Grab some popcorn (just a small bag) and watch the video. When you are done, send to your friend, wife, father, cousin, whoever you think may be thinking of selling in the next few years. When they do sell remind them you introduced them to the PropertyGuys.com and they owe you dinner. It's the least they could do!!
I have had the two opposite ends of the spectrum come across my desk in the last 10 hours.
Last night while at a St Paddy's Day party I had a great chat with a local Cambridge real estate agent. One that I had yet to really meet, but was bound to eventually as our kids go to the same school. We had a great chat over the food table (where else would I be) about how she approaches sellers and how she coaches her buyers that are looking to purchase a home that is listed with PropertyGuys.com. It was refreshing to hear a proactive approach where she explains to her clients that she is getting paid by them, whether it is included in the asking price or not, and she advises them to pay her directly through the lawyer so they can better negotiate the purchase with the seller. She doesn't call the seller to ask "Will you compensate me?" She calls and asks if she can show it to her buyers. She brings up commission if and only when they are discussing an offer. Usually she is able to say her buyers are paying the commission so they don't have to worry about negotiating the rate. An agent that is progressive and doesn't hide behind the numbers.
Today I hear from one of the clients I listed last week that were happy to report they had an offer. It turns out in their negotiations with the buyer's agent the agent wanted 3% instead of the traditional 2.5% a buyer's agent typically starts at. Our sellers were very clear that if the real estate agent wanted 3% that his buyers would have to pay more for the house. The agent proceeded to advise his clients to put in a higher offer to maintain his high commissions. So I ask you this, who's best interest is this agent looking out for? Last time I checked taking money from unsuspecting people was thievery.
IF you are going to use an agent to buy a home I will give you a few suggestions.
Second, discuss commissions up front with your agent.
How are they getting paid?
Will the agent drop their commission if they can't negotiate a price that is acceptable to buyer and seller?
How much commission are you willing to pay?
If you end up buying an agent listed house will they pay you back a portion of the commissions?
Third, know that if you are using an agent to buy a house, it is not free. You are paying more for the house because your agent gets paid through the purchase.
At the end of the day, you the home buyer decide if you want to use an agent. We coach PropertyGuys.com clients on how to interact with your agent and show them that if they maintain their bottom line (or more) and you are satisfied paying more because you brought an extra mouth to feed, why not entertain the offer?
Does a for sale sign on your lawn help you sell your house? Of course it does!
The for sale sign is responsible for a few things in the process. Let's first look at what it's use was in the past. In the dark ages (pre-internet) if you wanted to sell your house, the for sale sign was very important. It was one of the only ways to advertise your intention to sell your house. The only other ways were classified ads, bulletin boards, and the well connected real estate agent.
In today's age of the information super highway (do we still use that term?) your online listing is your for sale sign screaming to people zipping by at the speed of a Facebook news feed. But does the old school for sale sign, the one in real life, on your lawn, still offer you value?
To answer that question you have to go around the complete circle. What is the purpose of the sign and what information does it provide to it's intended audience? The main purpose of the sign has not changed. It is to tell people your house is for sale and how to get more info. An agent`s sign usually provides their phone number because they want the buyer. Maybe for your house or for another if your's isn't exactly what they are looking for.
On the PropertyGuys.com sign we have our ContactPro phone number so questions can get answered and appointments can be booked. We also have your Sign ID# to direct people to your online listing. This is where the virtual viewing of your home happens. It all starts with the buyer falling in love with your home and this can all start with an innocent drive through your neighbourhood and seeing that 5 foot tall lollipop sign on your lawn.
Don't underestimate your sign, it says you are selling and should connect people with your house, not someone looking to sell any house!
Let's first understand what the traditional "high fee agent" (5%) break down looks like. Typically a 5% commission is split 50/50. Meaning 2.5% goes to the buyer's brokerage and 2.5% goes to the listing brokerage. This means in a $300,000 home there is $15,000 in commissions paid. Man, that's a lot of skin!
In a typical discount brokerage 3% Program the listing brokerage typically discounts their fees down to 0.5% and offer 2.5% to the buyer's brokerage or on occaision they do 1% and offer 2% to the buyer's brokerage. In one way the listing agents are not getting "their share" and may skimp on the service. The other, buyer's agents will prefer to show other listings where they get 2.5%. Same house as above and your still spending $9,000. Still more then a skinned knee!
A typical 1% Program the agent is not offering any commissions to buyer's brokerages and are expecting to work on behalf of both buyers and sellers. The real danger is that for buyer's to get the info they have to call your agent. Your agent now has a buyer looking to buy a home. Your home pays them 1%. Every other home listed with agents (High Fee or Discounts presented above) get your agent more money. Why would they push your home when they can sell the one up the street and make more money! It may only be $3,000 if it sells but unfortunately for you they sold one of the two above and made $7,500 so you sit with their boring old square sign on your lawn selling other peoples' houses!
Ever think someone was telling you one thing and then doing another?
I hear this regularly. In my opinion, this is one of the biggest fallacies in real estate today!
Just because you don't stroke a cheque to your realtor doesn't mean you are not paying for it. Think about it. If you are selling your house and using a real estate agent your first thought is generally "I need to get $X for my house". Then you figure what the agent is going to cost and tack it on top. Looking at it from that point of view....the buyer ends up paying the ENTIRE realtor commission as the seller has passed it on to you.
I prefer to look at it this way. The cost of selling the home is on the seller and the cost of buying is on the buyer (what can I say...I am a no nonsense kinda guy). In a standard 5% realtor assisted transaction the 5% is split 50/50 between the buyers agent and the sellers agent, 2.5% each.
In a Private Sale transaction the seller pays to market the home with services like PropertyGuys.com and the buyer is responsible to pay for any representation he chooses to use (buyer's agent). Now this can be negotiated into the purchase price, meaning the buyer pays more for the house than without the agent, or the buyer can pay for the agent themselves. We have seen this happen but it is for sure the minority. Our experiences tell us that less than 15% of private sale transactions have a buyer's agent involved and that the BUYER is the one paying for them, even if they are paid through the transaction!
Now what exactly is a "Buyer's Service Agreement"? Below an agent describes what "Buyer's Representation" is. Pay attention to the comment about paying the agent whether they are the ones who find you the house or not. This would mean once you sign the agreement you are on the hook even if they do NO WORK!
OK so I talk quite regularly about selling. A recent comment asked about sharing some knowledge for buyers.
The comment specifically was:
I know property guys have been really going well with sell your self but what about buying. Using an agent seems to be the only option and then that becomes a problem since they won't show private sales.
Let's first focus on the misconception that using an agent is your only option when buying. Stats show that 90% of people start their home search online, not with an agent. We find that buyers are more concerned with the homes than the sign on the lawn. They care which website it is on because they want to be able to get as much info as possible while doing their search. As pointed out by Levitt & Dubner in Freakonomics the hording on information on the public facing portal of the MLS (www.realtor.ca) forces you, the buyer, to have to call them. Information hording throws the balance of the power on their side. Sites like PropertyGuys.com work the opposite way. As a home seller you want to talk to qualified buyers, buyers that want to buy your home. To do this you have to give them all the information you can. Quality photos, virtual tours, Google maps (including street view), and all the information you can cram into a web page.
As for agents not bringing buyers to private sale homes, this is another misconception. I would estimate that 5 to 10% of the PropertyGuys.com homes sold here in the Waterloo Wellington area are sold to a buyer with an agent. We make sure to coach our clients on just how to deal with an agent assisted purchase. It is simply about knowing your bottom line and knowing your "agent" bottom line (bottom line divided by .975). This will allow you to account for the agent's 2.5% commission they "expect" for working with a buyer. When worked this way the seller is not paying for the agent they are simply allowing the buyer to pay for the agent as part of their purchase. Want to see how it works?
Private Home Seller Asking Price - $300,000 Private Home Seller Bottom Line - $290,000 Private Home Seller "Agent Bottom Line - $297,435.90
If a buyer comes in "sans agent" they have $10,000 in negotiating room. Buyers that choose to use an agent now have less negotiating room on the house,$2,564.10 to be exact. This means they are paying for their agent without having to cut a separate cheque. As a buyer are you keeping your eye on the dollars you are spending?
Can you hear private sale buzz getting louder? We sure can!
I had the pleasure of spending some time at the KW Fall Home & Leisure Show. You almost couldn't think the buzz was so loud.
Bzz Bzz Bzz
"Hey I just wanted to say hi. Tonya helped us with the sale of our home in Conestogo last month!"
Bzz Bzz Bzz
"That sign sure looks better with the SOLD on it. We just SOLD in 2 weeks in Paris with William!"
Bzz Bzz Bzz
"Our neighbour just SOLD with you guys. I can't believe how quick it was!"
Bzz Bzz Bzz
"Can we book an appointment to list our home today?"
Real estate agents, brokers, realtors all want you to think that private sale is going no where. They could not be further from the truth. The buzz on the street is growing. Our clients are selling their houses and telling everyone how easy it is. Word is spreading. Fast.
How fast does word of mouth spread? Have a peek at this video...
Your eyes begin to pulse as you read further into the statement. Like a scimitar, words cut through your heart as if paper. With unabashed anger you stand up and throw the paper on the floor and begin to stomp on it. It is not enough, you need more. Grabbing the plant seems insane but you can't help yourself. Still your anger is unabated. The chandelier?
You want to buy a house and you still have one to sell. Most people would put in a conditional offer. This condition would state that your offer is under the condition of selling your home with in a time frame (30-60 days) and should include a bump clause that states that if any other offers come in during this time frame you would have the right to either firm up or walk away from the deal (usually allowing 48 hours to make your decision). Seems pretty straight forward, right?
As a home buyer you want nothing more than to breeze through a purchase (including the sale of your home as part of your conditional offer). It would seem local realtors don't want you to do that. They are angry. They feel deserving of your hard earned money. They are even willing to use coercion to get it.
Think coercion is to strong a word? Here is the definition from Dictionary.com:
Main Entry: co·er·cion Pronunciation: kO-'&r-zh&n, -sh&n Function: noun : the use of express or implied threats of violence or reprisal (as discharge from employment) or other intimidating behavior that puts a person in immediate fear of the consequences in order to compel that person to act against his or her will; also : the defense that one acted under coercion —see also DEFENSE, DURESS —compare UNDUE INFLUENCE.
As I wrote about in a previous post, local agents are using intimidation in the offer process. For you to get that house they are forcing you to have to list with an agent. Imagine the feeling of violation when you find out in order to buy your dream home you will be forced to spend thousands of dollars wastefully on a service you don't want or need.
My last post seemed to drum up some discussion and it got me thinking. What others topics are out there that people might want some answers to? If you have something that is a burning issue or that you can't get a straight answer to, drop me a line. This blog thing might as well be interactive, right?
Here is a question and answer dialogue that might have taken place on a typical website:
Q. We recently attempted to put an offer on a house with the condition that ours sells. The agent that has the house listed has informed us that we NEED to first list our own home with an agent before our offer could be considered – is this true?
A. This is definitely not true. Private sale has grown both in comfort level and popularity as the internet has gained momentum - and is now considered a mainstream alternative to traditional agents. It’s estimated that 25% of sellers are now choosing private sale and if 1 in 4 are trying it and experiencing the same success rates as those with agents then it cannot be denied as a credible strategy for selling. In fact, in many circumstances private sale has proven to be more effective than traditional because the seller’s asking price has not been inflated to pay commission. This allows the seller to price closer to what people are willing to pay, and therefore increases the likely hood of selling. The best defense against this type of scenario would be for you to go knock on the front door, and make the offer in person. The home seller can then decide if they want to consider the offer or not.
This is a pretty straight forward answer to the question. I try to lay things out with as much clarity as possible. In my opinion this type of action is morally and ethically wrong. As a Canadian citizen you have the right to sell your home how you please and you should not have anyone putting undue pressure on you in order to line their pockets. Your offer as a private seller is as good as that from an agent. In fact it has potential to be better! Without the high cost of commissions you can be more aggressive with your price which attracts more buyers. If this circumstance were to happen to you I would suggest that you advise the agent that the offer is conditional and they will have every right to continue to offer the home for sale. Any better offers will end up bumping yours in most cases so what's to loose?
We have seen many instances of this locally. If you or anyone you know has fallen victim to this type of deception by an agent let me know. Collectively your voice is louder and we will help you stop this from happening to someone else.
Guess who is coming to Waterloo Region and Guelph?
I was reading an article in the Record announcing the launch of Mike Holmes Inspections during his book signing in Waterloo today. I couldn't help myself when I saw a quote like "There also are questions over whether some inspectors are too cosy with real estate agents who don't want an inspection to kill a sale.
Realtor Myth #5 - Agents have a "network of professionals" at their disposal.
How many times have people been referred to a home inspector from an agent? Is there not a conflict of interest there? I have had a very qualified home inspector tell me flat out he does not get referrals from agents because he is overly detailed in his inspections and has caused the odd deal to fall through. As a buyer, that is the guy I want! What about as a seller? Absolutely, for my pre-sale home inspection.
Truth - When a business gets the majority of it's revenue from a single source, that source has the ability to put undue pressure on the business. If an inspector/lawyer/mortgage broker gets 75% of their business from one agent/broker/brokerage there is potential to have things "swept under the rug" to get the deal done. With the way the payment flows to agents, at time of sale, they need deals to close. No close, no pay. No pay, no food. Seems to me that is where the term "hungry for the business" comes from.
How hungry is your agent? Is he Hungry Like The Wolf?
Make sure if you get a referral from someone they do not have any interest in the outcome of the service provided. If they do, look for some objectivity.
Realtor Myth #4 - Agents are professional negotiators.
It's as if you were incapacitated by his power. Pen trembling in your hand, afraid to put ink to paper. Was it what he wanted? Would the pen let you down? Under his exacting stare you write down the number that he has wanted the whole time. Defeated you collapse into the rickety chair letting your tired head fall into your trembling hands. At least it was over.
Also it cannot be ignored that if an agent sold your home for $300,000 you would only receive $285,000 (actually less when you add GST on the commissions). That means that you would have had an extra $15,000+ in negotiating room to get the property sold FASTER.
For those younger readers that would prefer to hear Levitt's theory in rap, here you go...
Realtor Myth #3 - 90% of Private Sellers end up listing with agents when they get serious.
When your doorbell rings do you shudder at the thought of another real estate agent going door to door to "help out" people selling their house? Do you really need anymore phone calls or letters telling you how agents justify taking your money? Worst of all they use stats from when you were watching Saturday morning cartoons.
Truth - More and more people are selling privately. How do I know? I talk to home sellers every day. When I look at how many listings PropertyGuys.com has versus previous years, it cannot be denied.
In the last 3 months (Nov - Jan) here in Waterloo Wellington, stats show that PropertyGuys.com boasts a 53.98% list to sell ratio, meaning more than half the number of clients listed for sale have sold. Realtors for the same time period......39.39%. Even more impressive when you look at how things have flip flopped from the same time last year (47.3% for PropertyGuys.com and 64.17% for the Realtors)!
PropertyGuys.com phones are ringing off the hook with expired MLS clients. People are realizing that in light of the drop in market price that they need to reduce their costs. With real estate commissions being the largest piece of those costs, Private Sale makes more sense than ever before.
Next time your doorbell rings I hope it's not a SALESMAN!
Realtor Myth #2 - Real estate agents have all the buyers.
I hear this all the time. I always picture a a garden in behind the local real estate brokerage with new buyers poking out of the soil like pansies in the early spring. An agent standing there tossing a steaming load of sheep manure on them to ensure they are full of "nutrients". When the time comes they go back and pick a bunch of their favorites. Next, a drive around with their load of buyers delivering them to all the home sellers for a hefty price tag. Can you see it?
Truth - According to the Canadian Real Estate Association (CREA) 90% of home buyers are using the web to search for homes. The internet has changed the way business is done, just ask a travel agent. Buyers are more savvy, better informed and often know more about properties than agents because they have been looking and focusing on the few that they are interested in. Sure some buyers are looking in the paper and some are driving around in neighbourhoods but one thing most buyers have in common is the internet. Where this deep rooted misunderstanding comes from is when agents have homes listed they get calls from buyers. If the home seller's phone number or email address was on the website listing, who do you think the buyer would contact?
When that agent is standing at your door telling you about all the buyers he has, check to see if he has any manure under his nails.
I was recently asked by a client to provide some ammunition.
Like many private sellers he is being contacted by more real estate agents than he cares to talk to. Every real estate agent seems to have their own angle or propaganda they are pushing. After a while it just gets tired and boring and you just want to tell them all to go away. I was asked to post some ammunition to assist a private home seller in combating this propaganda with valid arguments. So today I will post the first of many bullets to put in your gun.
Realtor Myth #1 Real estate agents can sell your home for more money.
Truth - First let's discuss the basics. If an house sells for $300,000 the home seller only get $285,000 (based on 5% commission) if done the "traditional" way with a real estate agent. Agents would have you believe that without their involvement the home seller could not sell the same home for the same money. That a buyer will pay more money for a home simply because of the square sign on their lawn. Real estate agents will add value to the transaction simply by being involved. A recent study from the National Association of Realtors in the US shows that private sellers get closer to their asking price and sell sooner. Hmmmm.
Let's look closer to home to see how this relates to you and I. A property in Guelph was listed on PropertyGuys.com at a price that was higher than what the market wanted to pay - after several weeks the owner was solicited by an agent who is knocking on the door of all of our clients. He came with a promise to put the price UP $10,000 and sell no problem. Our client bit the hook and listed it for $340,000. After 90 days with the agent she was down to $319,900. It did not sell because the market was not attracted to the property at that price point - so she re-listed with PropertyGuys.com at $309,900. It ended selling for just under $300,000 after 5 weeks.
We see this time and time again. Real estate agents do not add value. They provide a service, an expensive one at that. If an agent comes knocking at your door tell them if they can sell your house for more money, go ahead. Your accepting offers. If they can get more than your asking tell them they can keep the difference. Tell them to head back to the office and in to the "buyer vault" and bring one over, heck bring two and start a bidding war.
Real estate agents claim all sorts of things. They claim that they can sell your home for more and then the next breath they say that you need to use them to buy because they will make sure you don't pay to much. Which is it? Do they make them more expensive or less money?
If there was any weight to this claim agents with buyers would only be shopping on sites like PropertyGuys.com because houses would be cheaper than ones listed with agents.
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