Real Estate Blog - Real estate questions from the public answered part 2.

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Real estate questions from the public answered part 2.

I have had some intriguing conversations with friends and acquaintances lately. Issues and concerns have been raised and I thought this would be a good platform to allow you to speak your mind and I will list this link on my main blog outside of AR.

I am curious to see how some of you will respond. I also received some great emails from four different homeowner's who are going the FSBO route and the saw the blog from yesterday FSBO lays down the law. Or so they think.

The general consensus was that they needed to save money and they couldn't do that if they hired an agent. They all stated they had horrible agents previously who didn't post pictures on their listings, never held an open house, didn't advertise, and never brought any buyer's to their house. Hmmm.....does that sound familiar?

We have all read or posted blogs about these offenders....the agent who doesn't do their job. Now we're getting somewhere. I think most of us assumed that people who sell their homes instead of hiring an agent MUST have had a bad experience. What I asked these consumer's was why didn't you fire your agent and get another one? The response was that it was made difficult by the agent and the broker and they were treated badly when asked to be let out of the contract. I was also curious about how they came to hire that particular agent. They were suggested by a friend.

These agents were only posting the listings on MLS and the seller wanted more exposure. Well, of course, they did. And they should have had it! I did not ask for the names of the agents, but all the people where happy to know that AR existed. They wished that this type of thing had been available to them then. A website where consumers can go and ask questions of professionals and get answers! Wow!!

Here are some of the questions asked. Please answer them in the comments section and give your opinion or feelings. I'm only going to address 3 of the questions on this blog. We'll talk about the other ones on a different blog. Thanks! And remember there are consumers waiting to see your answers on these questions. I welcome any comments with information and merit. If all you do is leave hateful, uninformative comments theres no need to comment here. :)

Questions:

1) How can I make enough money to pay off my mortgage when the prices on houses around me have dropped and pay a realtor commission? Why can't realtors drop their commission according to how much money I have to make on the sale of my house?

2) Why does a realtor have to charge such a high commission? What are they doing to deserve that? Listing my house shouldn't entitle them to so much money. What do they do to deserve so much?

3) If so many agents dislike people that have gone they FSBO route will they be fair to me if I approach them with questions or if I am thinking of hiring an agent now?

Image courtesy of

Aarinfreephoto.com

Posted by Pamela Williamson Team Saint Louis, Missouri Real Estate on 09/30/2007 01:35 PM

Comments (7)

real estate questions, consumers, listings, seller, buyer, pictures, house, home, mls, fsbo, open house, pamela williamson

Post is included in group: Marketing FISBO's Expired's and The Overpriced Seller

7 Comments on Real estate questions from the public answered part 2.

Pam,

Obviously, FSBOs are trying to change the rules of the game. We are the cause of that. I do not know the answers, but I think that this is just a tip of the iceberg, as we also have a much bigger group which is loosing affection for real estate licensees - The Buyers.

This is the topic of my next Blog.

09/30/2007 02:43 PM

by Jon Zolsky (FunCoast Realty LLC)

Pamela: here is another interesting perspective on the FSBO issue-I was talking with a client recently who is getting ready to list and planned to go FSBO. As the conversation continued-I mentioned the closing and she was unaware that agents received their pay AT CLOSING! Once we processed some of her assumptions-she has agreed to explore hiring an agent. WE should not assume that all FSBO's have something against the industry-some are just confused and/or uneducated! That's where service is so critical...I like this series of posts as it is an important conversation.

09/30/2007 03:14 PM

by Cheri Dueker -Transitional Designs, LLC Home Staging St Louis (Transitional Designs, LLC)

Pamela- Most FSBOs are not educated in what the agent does, a good agent that is. Once a conversation is started ask lots of questions. After they answer your questions you can get rid of their objections by educating and not being defensive. Agents defensiveness is usually the cause of the wall up by the FSBO.

Jon- Don't assume that all agents are the same. Don't assume that I do the same for a 100k house as I do for 1 million $ house! I work in the luxury market, I earn a very good real estate fee and I am worth every penny they pay me. It is a different ball game in the luxury market.

Also, Jon- we can not quote exact commissions here on AR. That is an anti trust issue. Katerina

09/30/2007 03:25 PM

by Nestor & Katerina Gasset Realtors® Wellington Florida Luxury Homes (International Properties and Investments, Inc.)

Hi Cheri. I know! I think there's a lot of misinformation out there. I am going to post my responses on my other blog...this was just a chance for people on here to give their opinions, experiences, etc. Thanks for your comment. :)

Hi Katerina! You are absolutely right. Being defensive prohibits the give and take and open dialogue. Thanks lady. :)

09/30/2007 05:40 PM

by Pamela Williamson Team Saint Louis, Missouri Real Estate (Nolting Real Estate and Development)

As to answering the ActiveRain questions, I'm inclined to stick to questions in MD and not go outside the state where I'm licensed, even for general questions. But, since you asked, here's my attempt at short answers to your quesions:

1) First, Realtor commissions are negotiable and second, they are usually based on your sale price - the lower the price, the less you pay an agent. And an agent may have professional experienc that will make a dffrence... for example, on 2 occasions I was able to sell the side yard separately, when I realized it was an extra lot... on anther, I helped sellers obtain a VA Compomise and yet another, negotiate with the PMI company to facilitate a short sale.

2) I think that's been adequately addessed elsewhere, and we all know the answer to that. We just have to communicate it.

3) Of course, we'll be fair!

10/01/2007 08:56 AM

by Margaret Woda, Crofton Maryland Real Estate (Long & Foster REALTORS)

I'm not a Realtor, so I have no problem posting specific information about commission.

The best Realtors I know charge 6% to list. They market the home well, offer a great compensation to buyers agents, and get the most foot traffic...which combine to get the house sold quickly and at the best price. They also know how to negotiate.

When I sell my house, I will use a Realtor that I trust...and I will pay them 6%.

10/01/2007 10:41 PM

by Hemet Home Loan Guy, Joey Aszterbaum (Patrion Mortgage)

1. You can't necessarily, but that is not the fault of the Realtor and is not caused by the Realtor commission.

My commission is not the problem, but the solution.

The FSBO illusion is that a house will sell for some magical absolute price in some fixed amount of time and that nothing can affect it. (Except where the seller decides to set the price, which is the price it will sell for--that's why when a seller needs to cover a mortgage, or needs $XX,000 to buy their next house, or put $XX,000 into the house and needs to get that back, or bought for $XXX,000 and both deserves to make some appreciation and shouldn't have to sell for less than they paid, they use whichever one of these pricing strategies is applicable to determine the right price for their home.) That means that hiring a Realtor is a pure loss to the seller. We've probably all seen this belief stated, and if you haven't, why, just go to your most convenient FSBO website: "Don't give your equity to a real estate agent!" "John and Marsha sold their home and saved $12,000!"

In general, though, homes will sell for more with a Realtor--and more than enough to make the commission. That means that sellers who go FSBO are, in all probability, going to net LESS by selling without a Realtor; that is, they actually cost themselves money in the end, all for the illusory benefit of not seeing a commission deducted from the sale proceeds on their side of the HUD-1 settlement statement. They do not see the commission deduction, true. But they also do not see written down the amount that they would have been paid if they had sold to a larger market with more buyers. John and Marsha didn't save $12,000. They merely didn't pay a commission on their sale. They also sold for $18,000 less than the Realtor would have sold the house for. So they LOST $6000. Of their equity.

Sellers selling by owner are selling wholesale. A couple things to reflect on: i. Do you ever buy at CostCo? Yes? Why? Price. Well, do you have to give up anything to do so? Yes: You pay a membership cost; you go without any service help or salesperson knowledge; you do all the shopping yourself; you risk more inconvenience and cost if the product doesn't work out. ii. Why does the FSBO seller have "by owner" on that sign on the lawn? The FSBO is making a different offer by using those two little words on their sign: "This sale is different. I'm not using any agent. It should be more attractive to you for that reason to buy my house from me." This is implicit, and inescapable. The message, whatever the seller thinks they're going to achieve (more money, because they don't have to pay a rapacious Realtor), is: This home will cost you less money than the same home sold by a Realtor. Whether the seller understands it or not, that is precisely what it says to buyers---and the buyers who shop homes selling by-owner all presume that, and discount the price by at least 5 to 8 percent, and usually much more.

Now, if that's the case, then sellers can gain by using a Realtor. So they'll be able to cover more of that mortgage by hiring a Realtor. Enough to pay it off? Well, that's a matter of what the market says the house will sell for (more with a Realtor, less without); but the one thing that is almost always true is that they'll do better against that mortgage payoff if they sell on a bigger market with a Realtor.

Why can't we drop our commission to what you need to make? Because what sellers "need to make" is a moving target, and has nothing to do with my price. What is your need to make number based on? Your mortgage? Your mortgage plus the equity line of credit you took out three years ago to buy a boat? What you need to pay 20% down on your next house? Okay, so say you "need" to clear $30,000 on your house that will sell for $250,000 and on which you owe $218,465. Great... so my commission should be, therefore, $1,535, which will be split with the selling broker and my broker. Oh, wait... suppose you decide you need to pay off a credit card bill too? Do you need my commission to be $535?

2. Why do you think the commission is so high? Realtors' commissions, in the range that I've seen are typically less than most other goods' selling commissions. And please go back and keep in mind: That commission is not just a tack-on to the real estate price; it is CREATED by the transaction, and earned by the transaction, because of the value that Realtors bring to both buyers and sellers.

Does that mean sellers sell for more when they sell through a Realtor? Yes. Does that mean buyers pay more when they buy through a Realtor? Yes. WAIT! HOW CAN THAT BE? BUYERS PAY MORE? Why, yes. They are paying more--that is, trading dollars--for risk reduction, time savings, choice, advice (risk reduction). Value is added by brokers and the part of the real estate market that brokers sell in (the part that isn't by-owner). Buyers have the option to buy directly from owners without representation by agents; they can go alone, they can use a lawyer, they have options. And yet 95% of buyers buy with agents. They must be finding something in it, or paying for service would have been arbitraged away a long, long time ago.

The fact is, the commission really isn't high, whatever it is. It is the market rate that both buyers and sellers determine they'll pay for the package of services provided. And it arises from the transaction. just as all selling expenses that are covered by a sale price do. Sale expenses aren't just tacked on above the "right" price or "cost"; they arise from the needs of the sale and are covered by the supply and demand price.

3. Yes. They will.

10/02/2007 05:41 AM

by David Stewart (Foxfire Realty)

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