Positive Real Estate Professionals

Over the span of the last 10 years, I have watched this battle evolve. When a home owner decides that it is time to part with one of their largest investments, a house, then they have a huge battle ahead of them. They have to pit Realtor® versus FSBO. Before I go any deeper, let me say that in 2007, I attempted the FSBO route. Even with all of my marketing skills and connections to the real estate world, I was unsuccessful in doing what I set out to do. I failed miserably and had to rethink my strategy. If I had to do it all over again, I would have hired someone that could have marketed it for me. With that said, let’s tackle the question between using a Realtor® or selling your home FSBO style.

For those of you that have seen FSBO but do not understand it, it simply means For Sale By Owner. We all know what a Realtor® is, but I fear that many people do not know what Realtors® actually do. A Realtor’s® duties are many, but for the sake of an argument, let’s just state that they are there to market and sell your property for the highest amount that they can. They work for you, the seller, and they keep you out of legal hot water as well. I can sit here and tell you all day long what the difference of using a Realtor® versus FSBO, but why should I when I have access to many different Realtors®.

With that said, I polled the members of PREP for their responses on this very subject. I would like to thank the ones that had the time to respond. If you click on their names, you will be able to visit their sites. If you are in the area any of these great Realtors® serve, I so recommend that you contact them for your real estate.

Jodi Smith of Keller Williams Realty Consultants Agent out of Roswell, GA had this to say:

A Realtor® provides legal information to Sellers in regards to the new Georgia contracts, Truth in Lending and HUD changes.  The market price of homes changes continuously. A Seller needs a Realtor® to make sure they are selling their home at the most competitive price so to attract more buyers.

Lori Cain of Chinowth & Cohen Realtors in Tulsa, OK adds:

As a Realtor® who works with both Buyers and Sellers, I know what Buyers are looking for and how Buyers shop. Coupled with knowledge of local market trends, I am equipped to reach your target Buyer, thereby improving your chances of receiving a higher offer in a shorter amount of time.

Kay Born of Solid Source Realty out of Big Canoe, GA gave this input:

Studies show that sellers who use a REALTOR® get a much higher price for their home.  If you represent yourself, you have a fool for a client.

Brigita A. McKelvie of Keller Williams Real Estate serving the Lehigh Valley area of PA stated this:

Buyers tend to take advantage of FSBO’s and will bring in low ball offers because they know the seller is unrepresented. A REALTOR® has experience negotiating and will get not only the best and highest possible price for the home, but also negotiate any other items that may come up such as contingencies. A good REALTOR® will make sure all goes smoothly with the least amount of worries to the seller right up through settlement.

Jeff & Grace Safrin of F.C.Tucker 1st Team Real Estate out of Valparaiso, IN threw in:

Value added services seperate FSBO sellers from professional REALTORS®. In today’s market, pricing a home correctly, marketing it to the masses, qualifying potential buyers, negotiating the contract, is the easy part. The REAL WORK in real estate transactions these days with changing lending rules is working through multiple issues ( inspections, appraisals, titlework, escrow, etc..) to get the property to close!

Terrylynn Fisher of Diablo Realty in Walnut Creek, CA added:

My job as your agent is really threefold…to be a counselor, a negotiator, and a facilitator.  You benefit from my experience of having successfully marketed and sold hundreds of homes in the past 30+ years.

You’ll benefit from not only what I do, but more so from what I know.

As your negotiator I will utilize every technique that I have ever learned to impact the sales price and terms in your favor.  A skilled negotiator with a negotiating strategy can net you 3 or 4 or 5% extra.

As your facilitator, I’ll insure that nothing falls through the cracks, legalities, contingencies, inspections, disclosures and timely coordination of all the players, that is my job.  Can you do this on your own, sure, but the largest investment many families make in a lifetime is at risk.  We spend 100% of our time on real estate, hiring a Realtor® allows you to have expert advice and counsel and spend your time living your life.

So, with all of this input, one has to wonder why anyone would go it alone and take the FSBO route when selling a home. If you have questions about this article or any article written here, please feel free to contact us. We are here to serve our members and our readers.

Many people who are buying homes today are young, first time buyers. Because of the enormous financial responsibility that buyers are taking on, it is important to do a bit of research into the different options that may be available. With the soft sellers’ market that many areas of the country have been experiencing over the past few years many Realtors®, builders, and sellers are offering more incentives to buyers. Keep in mind that there is no one single, monolithic market when it comes to real estate but thousands of local and hyperlocal markets that are as unique as snowflakes. With that said, one of the most common incentives offered to buyers is the home warranty.

Let me make clear that a buyer should not assume anything when it comes to the home buying process; this includes that a home warranty will be included as an incentive or that one is even available for purchase. Ask your Realtor® about the availability and cost of a home warranty. A home warranty is a service contract that is generally offered for purchase to a home buyer and covers the kinds of mechanical breakdowns that regular home insurance doesn’t. Many home warranties do have deductibles that the homeowner is responsible for paying on a per incident basis. The details of these contracts do vary but they generally cover the repair or replacement costs from normal wear and tear of electrical, plumbing, and heating systems as well as many major appliances. It is important to discuss with your Realtor® what is covered and what is excluded by the home warranty service contract; if you are still unsure consult an attorney. The duration of the home warranty coverage can vary so this is another important point to to be clarified. Additionally, many home warranties can be extended on an annual or multi-year basis for a fee so understanding whether your home warranty can be extended is also important.

There are some common complaints associated with some companies that offer home warranties so it is important to check with either your state’s regulatory agency or your state’s Attorney General’s Office (Click HERE for a complete list) for complaints and/or pending litigation. Some common complaints include the exclusion of pre-existing issues (many of which can be discovered by a thorough home inspection), many home warranty companies favor repair over replacement, and many home warranty companies retain control over who does the work. Of course you can always ask your Realtor® about the reputation and practices of various home warranty companies. Many Realtors® have first hand knowledge and experience with the various home warranty companies.

Your Realtor® can advise you on many of the pros and cons of a home warranty. If a home warranty is being offered as an incentive, be sure the premium is being paid in full for the term (length of time) of the agreement and that it is disclosed on the final escrow statement (HUD1). If a home warranty is not being offered as an incentive, it is ultimately the decision of the buyer to determine if the purchase of one is in their best interest.

It is important to always remember that all real estate is local or hyper-local. With that said good news emerged today from ‘across the pond’. It appears that the modest gains that have been being reported in many U.S. housing markets and the positive moves made by many Money Center Banks are beginning to catch on around the world. Now I do not want to report any unrealistic numbers nor do I want to give any unrealistic expectations.

With that said, Rightmove which is touted as the U.K.’s number one real estate property website, is reporting a 1.8% increase in asking price for the month of March. You might be saying that this is barely a gain and I would answer that that view is somewhat pessimistic. This is a realistic gain that is sustainable. To have a huge gain would generally demonstrate an external and non-sustainable cause. It is important to not begin a risky growth cycle that would be indicative of a real estate bubble.

Much of the growth in the U.K. is attributed to the Bank of England having cut key interest rates to 0.5%. This coupled with the purchase of some of Great Britain’s toxic assets is contributing to banks easing lending restrictions. This easing of restrictions does not mean a return to reckless lending but lending to properly qualified applicants. Central Bank data show that mortgage approvals in February rose to 38,000 which represents the biggest increase since May, 2008; while this figure is still down, it does show improvement.

In many situations when a crisis emerges the initial reaction is to over-correct. This over-correction has so strangled the lending ability of banks that many have similarly been forced to turn away otherwise qualified applicants. In my opinion, this over-correction has contributed to the economic volatility in world markets. Hopefully this is another indicator that sensibility is returning to the world’s economy.

Today’s difficult economic reality has many people being vigilant on their spending habits. The following article from Danny Thornton is a great example of smart economizing and potentially costly economizing. I hope that it provides some good food for thought, especially if you are considering buying or selling your home.

Via Danny Thornton on The Mortgage And More Blog:

Over my years of service in the mortgage industry, I have always encountered people that are out to save a dime. Now, before you get the wrong impression, I do not think that saving money is a bad thing. However, when it means that you need to cut corners, I think it is the worst thing that you can do. When it comes to Real Estate transactions, it is best to not go it alone. Too many times I have been speaking to an applicant that is looking to acquire financing to buy a home and learn that they are doing it without a Realtor. In my opinion, this is about as silly as taking a shower without the soap. The water can help knock off most the dirt, but the funk is still going to be there.

Whether you are buying or selling a home, when you decide to take it on by yourself, it is even more difficult. Not only do you lose the expertise of the Realtor of today’s market, you also lose their expertise in marketing. That is just the two things that are on the surface. You lose much more than that when you really get past the surface. A Realtor can instruct you on things that you do not know about, such as the benefits of a particular neighborhood that you might want to check out. Ultimately, going into a selling or buying mode for Real Estate without the advice of a professional is as bad of an idea as it would be to go to Alaska in the middle of Winter with just a bathing suit.

Where most people go wrong with this thought is they typically do not know the ins and outs of the Real Estate Market. Leaving your Realtor on the shelf might cost you money in the end at the closing table. You are basically leaving your negotiator at home. Would you want to have take on a hostage situation without the backing of the best negotiator on the police force? I do not think so.

So, before you decide that you want to list that home on FSBO.com or any other site that leaves out the Realtor, think about what I said. You might save the money on the closing, but if you misprice your home or have trouble with negotiating, you could lose even more money than you are saving. Oh, and before I forget this most important fact; time is money. How much is your time worth?

With this being undeniably a buyer’s market there are a lot of properties for buyers to choose from; this also means that there are a lot of properties for Realtors to wade through to try to match buyer’s wants. This being the case there has been a conundrum in the past two years: why lenders who had agreed in principle to the terms of a short sale would diminish the likelihood of that sale occurring? What I am referring to is the unabashed insistence by many lenders that Realtors on both sides of the transaction take reduced commissions. Now many of you may wonder what the issue with this is; don’t all Realtors drive Mercedes and eat at swanky restaurants? This idea is not only wrong but it presumes that Realtors are heartless as they dine on caviar while their clients can barely afford hamburger helper. Keep in mind as you read the following article from Sandy Noll that the general commission on a sale is 6%. This 6% is then split 3% to the seller’s agent and 3% to the buyer’s agent. Sounds good right? Wait, both agents then have to split their 3% with the Broker/Owner of the real estate office they work for. This split can range from 70%-30% to 50%- 50%. So on that $100,000 dollar sale the total commission is $6,000. Split among the agents makes it $3,000 each and then taking a 70%-30% split (which is very generous on the part of the Broker/Owner) you get the agent making $2,100. While this may seem like a lot, both agents will have to pay out of pocket for all of the marketing of their listed properties and all the taxes. So my point with this big lead in is cutting the commissions of the Realtors not only may be counterproductive in the selling of short sales, it also directly affects the families of Realtors who work hard to provide for them.

Via Sandy Noll:

Score one for Realtors®! This is great news considering the number of short sales in our market and never knowing if you’ll be compensated for all your hard work and time spent!

Fannie Mae Announces Policy Prohibiting Lenders from Reducing Commissions Below 6% on Short Sales.
March 2, 2009 5pm

Every agent who has participated in a short sale transaction knows there may come a moment when the lender announces a reduction in the commission it will approve as a condition of accepting an offer. A great deal of angst circulates around this issue because, despite what the seller agreed to pay in the listing agreement and notwithstanding the advertised SOC, the transaction cannot close without the lender’s approval which is often a “take it or leave it” position. The buyer and seller want the transaction to close and agents do not want to be a road block to that outcome. Balanced against this is an agent’s and broker’s need to earn a reasonable income and justify their own expenses and liability incurred in a transaction. If lenders condition acceptance of short sale terms on agents’ willingness to accept a reduced commission, agents really have no power – except to decline to list or show short sale properties in the first place – a tragic result for everyone, including lenders.
Fannie Mae was made aware of this pattern and the adverse consequences of agents and brokers avoiding short sales. As a result, Fannie Mae announced a revised policy that took effect March 1. Now, “closing of preforeclosure sales may not be conditioned upon a reduction of the total commission to be paid to real estate agents to a level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6 percent of the sales price of the property in aggregate.” This policy applies to Fannie Mae loans only and only to those loans where the borrower is in default. Nevertheless, it should give agents and brokers a degree of comfort in knowing that the agreed and earned commission will be paid on many short sale transactions. For a property secured by a Fannie Mae loan, where the seller is in default, the lender may no longer condition acceptance of buyer’s short sale offer on the agents’ and brokers’ agreement to reduce their commission below a total transaction commission of 6%.

The new Fannie Mae policy says the following:

Servicing Guide, Part VII, Section 504.02: Contacting Selected Borrowers
Effective March 1, 2009, closing of preforeclosure sales may not be conditioned upon a reduction of the total commission to be paid to real estate agents to a level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6 percent of the sales price of the property in aggregate. Servicers are reminded that they must continue to obtain any approvals that may be required by interested third parties in connection with preforeclosure sales.

Sandy Noll
Realtor
Keller Williams Realty Kirkland
425-890-0878
sandy@sandynoll.com
www.letsachieveyourgoals.com

http://positiverealestateprofessionals.com/washington/

Your Residential Real Estate Specialist