We recently sold a home in Cudahy on Rosewood Dr that had been with Homeowners Concept for a number of months but had switched to a 6% broker after it expired with us. During the listing we had 3 offers from 3 different buyers but all where for a price that was unacceptable to the seller.
The first offer was the highest for about $205,000 but sellers felt that "they were not going to give it away". A couple of months later sellers reduced the advertised price and another offer came in for just under $200,000. Again sellers rejected it as inadequate. After a period of time a third offer came in even lower than the first two offers. Despite the writing on the wall of a declining market, the sellers refused to accept it. About this time the listing came up for expiration and to our amazement sellers wanted to try a conventional "high commission" broker.
After a few weeks with the new broker, sellers reduced their price to under $200,000 (and paying 6% on top of it now). The buyer with the 3rd offer was made aware of the reduction and was willing to redraft the offer now that the sellers had come to grips with pricing. The new offer was finally accepted and because buyer had been found during the time with Homeowners Concept, the commission to seller fell under our low fee (buyer was an exclusion to their new listing with the high commission broker and he was not entitled to any commission). Sellers were very lucky that the buyer had not found a property and as a result we were able to put the deal together and save them a big chunk of the 6% commission.
In summary, most sellers rely on our expertise (and we do have much more expertise than the average high commission agents) especially important in the real estate environment that we are in. Every so often though some sellers refuse to listen to facts and market data. And by paying much more commission makes absolutely no difference to a buyer as these sellers found out. Cases such as this have happened to us before (we have been saving sellers the huge commission for 25 years now and listed tens of thousands of homes). We even have had a few situations whereby Homeowners Concept brought the buyer to the table after the sellers had switched to a 6% broker. In those cases sellers paid 6% and Homeowners Concept was paid MORE than our low fee (we got paid the co-broke commission since we brought the buyer -2.4% on average-).
Thursday, February 26, 2009
Friday, February 20, 2009
Flat Fee companies - An eye opener!
We regularly list properties that were on the market as a FSBO and had paid hundreds of dollars UPFRONT to be in MLS via companies which are known in the industry as "limited service". There are a number of companies that offer to put a listing in MLS as "unserviced" or "unrepresented" meaning that they are not involved in setting appointments, feedback, negotiations, paperwork, etc. They do this for a flat upfront fee of as high as $555. At the urging of a recent client who had previously been with a limited service agency and having paid $495 upfront (a company that she heard from only once in a six month period), we conducted a study to find out how many of their sellers never sold and consequently lost their upfront money.
We compiled the listings that expired in 2008 for 8 limited service companies in SE-Wisconsin (there may be more). We identified 1,142 expired properties. We then analyzed a statistical 10% sample of these expireds to make sure that they had not relisted or sold later under a different MLS number. 8% fell in this category. Extrapolating the figures indicates that 1,062 properties never sold and consequently sellers WERE OUT over $500,000 (average of $470) in upfront fees just in 2008! Half a million+ dollars wasted, with no results. Less than 40% of properties listed sold this way.
Clearly the sellers are completely unaware that listing with limited service companies is an expensive, time consuming way to avoid costs that in the end compromises their ability to sell or sell at top price. These outfits are well known in the industry as "list them and forget them". You can see why; there is no incentive to work with the seller to properly stage and market the property. They got paid a HEFTY FEE UPFRONT. The advertising is minimal to non existent outside of MLS. In addition, full service agents know that they have to do extra work because sellers do not have a full service broker handling their end of the deal. Therefore, limited service listings get less than enthusiastic showings by most full service brokers (blame human nature). As a matter of fact one of the local limited service companies (that also offers full service) even points out the advantages of full service right on their website!! They still stick you with a $500 upfront fee though. One can see why the success rate is low and one must feel for all those sellers that pay all this money upfront and in the end are unsuccessful in selling.
All of these MLS only companies have sprouted in the last few years. As potential sellers become aware of the very low selling rate for the large upfront fee this model could become just a fad. Unlike online stock trading, selling real estate successfully involves good exposure for the property AND expertise on proper pricing, staging, feedback, negotiations during contract, inspection and closing issues. These are items you don't receive from limited service companies but you get from Homeowners Concept. It is truly impossible to fathom a method less expensive than Homeowners Concept without compromising the saleability of a home.
We compiled the listings that expired in 2008 for 8 limited service companies in SE-Wisconsin (there may be more). We identified 1,142 expired properties. We then analyzed a statistical 10% sample of these expireds to make sure that they had not relisted or sold later under a different MLS number. 8% fell in this category. Extrapolating the figures indicates that 1,062 properties never sold and consequently sellers WERE OUT over $500,000 (average of $470) in upfront fees just in 2008! Half a million+ dollars wasted, with no results. Less than 40% of properties listed sold this way.
Clearly the sellers are completely unaware that listing with limited service companies is an expensive, time consuming way to avoid costs that in the end compromises their ability to sell or sell at top price. These outfits are well known in the industry as "list them and forget them". You can see why; there is no incentive to work with the seller to properly stage and market the property. They got paid a HEFTY FEE UPFRONT. The advertising is minimal to non existent outside of MLS. In addition, full service agents know that they have to do extra work because sellers do not have a full service broker handling their end of the deal. Therefore, limited service listings get less than enthusiastic showings by most full service brokers (blame human nature). As a matter of fact one of the local limited service companies (that also offers full service) even points out the advantages of full service right on their website!! They still stick you with a $500 upfront fee though. One can see why the success rate is low and one must feel for all those sellers that pay all this money upfront and in the end are unsuccessful in selling.
All of these MLS only companies have sprouted in the last few years. As potential sellers become aware of the very low selling rate for the large upfront fee this model could become just a fad. Unlike online stock trading, selling real estate successfully involves good exposure for the property AND expertise on proper pricing, staging, feedback, negotiations during contract, inspection and closing issues. These are items you don't receive from limited service companies but you get from Homeowners Concept. It is truly impossible to fathom a method less expensive than Homeowners Concept without compromising the saleability of a home.
Sunday, February 15, 2009
$8,000 Buyer Tax Credit - No Repayment!
The Economic Stimulus Bill (The American Recovery and Reinvestment Act of 2009, H.R. 1.) has been passed by the US House of Representatives and US Senate and it's certain to be signed by the President on Tuesday 2/17/09.
The First-time Homebuyer Tax Credit - an $8000 tax credit (or 10% of the home purchase whicever is less) will be available for qualified purchase of a principal residence by a first time homebuyer between January 1, 2009 and December 1, 2009. The credit does not require repayment. Individuals who purchase in 2009 using financing assistance from state and local mortgage bonds (such as WHEDA) will be permitted to use the credit, as well.
The Tax Credit is for home buyers (either spouse if filing jointly) who have NOT owned a principle residence during the three-year period prior to the purchase. Ownership of vacation property or rental property does not disqualify home buyers from this program. To qualify for the full tax credit, married couples' modified adjusted gross income (MAGI) should be under $150,000 and single filers' MAGI should be less than $75,000. Partial tax credits may be available for married couples with MAGI incomes of over $150,000 but under $170,000 and single filers with incomes over $75,000 but under $95,000. If married couples who qualify for the first-time tax credit file separately, they would both claim 5% of the home purchase or $4,000 each (whichever is less) on their tax returns. There is no recapture or repayment clause IF the home is owned for at least 36 months.
This a great gift for the first time buyer who has the downpayment (minimum 3.5% for an FHA loan). We would have preferred to see the credit as the downpayment or part of the downpayment reflected on the closing statement making it much easier for buyers to buy right away. Nevertheless, if buyers are interested in buying this year they can start saving the tax credit by updating their W-4 forms with the employer so less money is deducted from their paycheck.
The First-time Homebuyer Tax Credit - an $8000 tax credit (or 10% of the home purchase whicever is less) will be available for qualified purchase of a principal residence by a first time homebuyer between January 1, 2009 and December 1, 2009. The credit does not require repayment. Individuals who purchase in 2009 using financing assistance from state and local mortgage bonds (such as WHEDA) will be permitted to use the credit, as well.
The Tax Credit is for home buyers (either spouse if filing jointly) who have NOT owned a principle residence during the three-year period prior to the purchase. Ownership of vacation property or rental property does not disqualify home buyers from this program. To qualify for the full tax credit, married couples' modified adjusted gross income (MAGI) should be under $150,000 and single filers' MAGI should be less than $75,000. Partial tax credits may be available for married couples with MAGI incomes of over $150,000 but under $170,000 and single filers with incomes over $75,000 but under $95,000. If married couples who qualify for the first-time tax credit file separately, they would both claim 5% of the home purchase or $4,000 each (whichever is less) on their tax returns. There is no recapture or repayment clause IF the home is owned for at least 36 months.
This a great gift for the first time buyer who has the downpayment (minimum 3.5% for an FHA loan). We would have preferred to see the credit as the downpayment or part of the downpayment reflected on the closing statement making it much easier for buyers to buy right away. Nevertheless, if buyers are interested in buying this year they can start saving the tax credit by updating their W-4 forms with the employer so less money is deducted from their paycheck.
Thursday, February 12, 2009
Much more than savings....
Recently a past client of Homeowners Concept made the following comment on our blog: "...So let me get this straight, you guys offer more advertising than the competition, have sharp realtors, don't rip sellers off on extra fees and you charge a lot less than 6% and have been in business for 25 years? Really, you have to be brain dead to try to sell any other way. Before my home sale I thought it was all about the savings. You need to get the word out that you are more than a low cost company."
Beautifully said Mr. Anderson and thank you for your suggestion. We promise to do a better job making the consumer aware that our method of doing business not only saves the big commission but the sellers and buyers truly have a highly skilled real estate expert working for them. Even though we are very proud of our 25 year record, having sold tens of thousands of properties and saved well over $90 MM in commissions, we should do much more in the next 25 years.
Beautifully said Mr. Anderson and thank you for your suggestion. We promise to do a better job making the consumer aware that our method of doing business not only saves the big commission but the sellers and buyers truly have a highly skilled real estate expert working for them. Even though we are very proud of our 25 year record, having sold tens of thousands of properties and saved well over $90 MM in commissions, we should do much more in the next 25 years.
Thursday, February 5, 2009
For Sale By Owner? Get all the facts.
The very reason we exist is a result of For Sale By Owners (FSBO). It was winter of 1984 when our founder walked away from buying a For Sale By Owner (FSBO) after he realized the legal cost involved and time away from work necessary to meet with a lawyer during business hours. He wondered how many other buyers walk away from buying a FSBO if Realtor assisted homes are easier to get. A little research at the central library consisted of calling 100 FSBOs from the newspaper ads of 3-5 months before, showed that very few sellers were successful (at that time only 12% of FSBOs were able to sell without any Realtor help - most recent national survey shows that only 16% are successful). Either way these numbers are dismally low. It was then that he realized that there has to be a better way for real estate to be sold and our Concept was born as the "missing link" for FSBOs to achieve the Realtor advantages without the hefty commissions.
Ordinarily, FSBO is the cheapest way to sell most of the time (although there have been cases where FSBOs have spent far more than our fee, mainly on advertising and attorney costs). However, if one factors in the extremely low probabilities of selling as a FSBO the cost of selling is substantially higher. It is the time one loses trying as a FSBO (usually 8-9 weeks) that damages the home's chance of getting sold at its highest price plus the money a FSBO spends on marketing. It is the buyers' reluctance to enter negotiations with the seller directly and spend hundreds if not thousands of dollars in legal fees plus maneuver through the transaction on their own that dooms the FSBOs. One of the fallacies sellers have is that a buyer will use "their" lawyer to do the buyer contract, counters, amendments, etc. That is extremely rare and besides attorneys list their homes with Realtors at the same rate as any other profession (they know better). Over the years we have had hundreds of sellers who were trying completely on their own, then turn to our company and within a number of days to a few weeks get an accepted offer as a result of us being involved.
Every year, $100s of millions of dollars are wasted by sellers trying to sell as a FSBO before they turn their home over to a Realtor to eventually sell it. With our flat fees of about 1.5% we are absolutely the best avenue for anyone thinking FSBO. If sellers knew all the facts, they would never resort to sell a property as a FSBO not as long as companies like ours are around.
Ordinarily, FSBO is the cheapest way to sell most of the time (although there have been cases where FSBOs have spent far more than our fee, mainly on advertising and attorney costs). However, if one factors in the extremely low probabilities of selling as a FSBO the cost of selling is substantially higher. It is the time one loses trying as a FSBO (usually 8-9 weeks) that damages the home's chance of getting sold at its highest price plus the money a FSBO spends on marketing. It is the buyers' reluctance to enter negotiations with the seller directly and spend hundreds if not thousands of dollars in legal fees plus maneuver through the transaction on their own that dooms the FSBOs. One of the fallacies sellers have is that a buyer will use "their" lawyer to do the buyer contract, counters, amendments, etc. That is extremely rare and besides attorneys list their homes with Realtors at the same rate as any other profession (they know better). Over the years we have had hundreds of sellers who were trying completely on their own, then turn to our company and within a number of days to a few weeks get an accepted offer as a result of us being involved.
Every year, $100s of millions of dollars are wasted by sellers trying to sell as a FSBO before they turn their home over to a Realtor to eventually sell it. With our flat fees of about 1.5% we are absolutely the best avenue for anyone thinking FSBO. If sellers knew all the facts, they would never resort to sell a property as a FSBO not as long as companies like ours are around.
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