Some sellers are trying to spur multiple bids on their properties by purposely underpricing the home. Can You Spark a Bidding War on Your Listing?
Why Your Realtor Asks for 6 Percent Commission
“I still say realtors should be tarred and feathered (6-7 percent for what)?” -- Ronald
Last week on OdentonPatch.com, I wrote an article about a new housing development coming to Waugh Chapel Road. The article generated a wide array of comments, including the one from “Ronald” above.
Reviewing the comments, I wondered: Are realtors really so heinous they deserve to be tarred and feathered? In my opinion, no. Some realtors, perhaps. But certainly not all.
Realtors earn scorn in part because they often do a poor job explaining why they deserve compensation – and a certain minimal level of compensation -- for their work. So here’s a stab at clarifying why most realtors request 6 percent commission on sales, and why I believe that amount is not only fair, it’s in the seller’s best interest. Case Study: A $300,000 House
First, let’s pull apart that 6 percent commission. As an example, consider a home selling for $300,000. The total commission paid on the sale of the home would be $18,000 ($300,000 x 6 percent).
Does the agent who sells the home get that amount? No. Normally, half the total commission, in this case $9,000, goes to the buyer’s agent. That leaves the selling agent with $9,000.
So, the selling agent takes that amount and puts it in his bank account, right? No. In a typical scenario, the selling agent takes home only a fraction of that amount.
Of the selling agent’s $9,000, roughly $3,000 (1 percent of the home’s sale price) must be given to the agent’s broker. This amount is paid to the broker for the honor and privilege of working under the broker’s banner, using his facilities, administrative support, supplies, etc. That leaves the selling agent with $6,000 of the $18,000 total commission on the home sale – roughly 2 percent of the purchase price.
So what does the agent do with that 2 percent? Depending on the quality and marketability of the property being sold, and how the agent conducts his business, the agent might spend roughly half of that amount – 1 percent of the total compensation for the sale – on marketing the property and completing other tasks associated with the sale.
These expenses vary, but they include things like:
- email marketing;
- direct mail marketing (including postage);
- web marketing;
- printing flyers, home books, comment cards and marketing packages;
- purchasing and installing signs & directionals;
- listing the property on the MLS;
- installing lockboxes and enlisting entry card services;
- hiring an automated showing service;
- conducting and marketing open houses; and
- creating virtual video tours.
So after paying these (and related) expenses, realtors end up with roughly 1 percent of the home’s sale price.
But not so fast. Out of this 1 percent realtors still must pay their membership and licensing fees, errors and omissions insurance, transportation and other costs directly associated with their work. Thus, in the case of a $300,000 home, the realtor may earn around $1,500 for an estimated 25-50 hours of work. The $1,500 is the net income he nets -- what he uses to put food on the table for his family.
5 Percent v. 6 Percent?
When selling a home, it’s common for homeowners to choose a listing agent based on whether the agent charges 5 percent or 6 percent commission. While there’s nothing inherently wrong with this, it’s important that homeowners understand the possible consequences of going the cheaper route.
Indeed, the 1 percent savings a homeowner seeks in choosing a “5 percent agent” can actually make the home much harder to sell, extend the time it sits on the market and lower the final sale price. There are two main reasons for this.
First, if the “5 percent agent,” because he’s getting less commission, is forced to choose between cutting his own pay or cutting the property's marketing budget, which do you think he’ll choose? Second, if a buyer is choosing between two virtually identical homes, but one seller is paying 5 percent commission and the other seller is paying 6 percent, which home might the buyer’s agent like best? The home with the seller paying more commission, of course.
Such practices are totally unethical, but in the real world, there are buyer agents who attempt to steer their clients to homes that pay more commission. Where this happens, sellers who pay the smaller commission sometimes are at a disadvantage.
Tar & Feathers?
Of course, all of the commission numbers discussed above are estimates, and no two agents work the same way or have the same arrangements with their broker. Some agents enjoy much more financial success than others, and different agents face different kinds of costs, depending on the way they conduct their business.
Still, on the whole, very few agents get rich in today’s environment. In fact, I’ve seen it reported that nine out of 10 new agents are out of the business in two years, most for financial reasons.
Do some “fat cat” agents sit back, rest on their laurels and collect big commissions for doing very little work? Yes. But that doesn’t mean all agents do, or that all agents should be tarred and feathered.
Jerry Kline is a Realtor with the Odenton, Md., office of Keller Williams Flagship Realty (1216 Annapolis Rd., Odenton.) For more information on the local real estate market, contact him at (443) 924-7418.
New 14-Home Subdivision Coming to Odenton
Prices for Ameristar the single-family homes range from $379,990 to $419,990 for base models. Call me today to learn about the builder's extra incentives!
Motorists traveling along Waugh Chapel Road between Chapel Grove and the WB&A Trail may notice a new residential community of single family homes being built by Ameristar Homes. Unveiled this week, the 14-home subdivision, known as Crawford’s Knoll, will offer three- and four-bedroom models with base prices ranging from $379,990-$419,990.
According the Wendy Oliver, Ameristar Vice President of Marketing & Sales, standard features for the homes include garages, sprinkler systems, granite counters, oak cabinets, stainless steel appliances, stone or brick fronts and a 10-year builder warranty. Construction of the new units is expected to start in November with finished homes available as early as February 2013.
Oliver said seven home models are available, with a choice of one- or two-car garages and three or four bedrooms. The home sites are positioned on a cul-de-sac on a gently rising slope.
The homes are located in the Waugh Chapel Elementary, Arundel Middle and Arundel High school districts.
Crawford’s Knoll homes will have public water and sewer service. Homeowner association fees for the community will be $250 per year and the annual front foot benefit charge will be $480.
Ameristar currently is offering up to $5,000 in closing help on qualifying purchases. In addition, Certain VA buyers may qualify for up to 100 percent VA financing.
Ameristar homes, based in Glen Burnie is a Certified Master Builder, one of only nine such builders in the state. They have built scores of new homes in Anne Arundel County.
Jerry Kline is a Realtor with the Odenton, Md., office of Keller Williams Flagship Realty (1216 Annapolis Rd., Odenton.) For more information on the new Crawford's Ridge project or on the local real estate market, contact him at (443) 924-7418.
Will My House Ever Sell?
Four novel ideas for (finally) attracting some contract offers
Worried about whether your house will sell or fretting about how long it’s taking?
If you’ve followed the advice of your listing agent and cleaned, staged and lowered the price of your home to make it more competitive, there are a couple of other ways you can boost interest in your property and snag an attractive offer.
A recent story on the real estate web site Trulia offers four novel suggestions to help your home outshine others on the market (http://www.trulia.com/blog/taranelson/2011/08/4_buyer_incentives_that_sell_homes). These techniques are growing in popularity and might make a difference for you.
Interest Rate Buy-Downs
When seeking mortgage financing, buyers often have the option of paying “points” on their loan to lower their interest rate. To promote buyer interest in a listing, homesellers can offer to pay the points on a buyer’s loan. This incentive allows buyers to obtain a better interest rate than they might otherwise qualify for, allowing them to save thousands of dollars on mortgage payments over the life of the loan. Plus, in many cases, the points are tax deductible for the buyer for purposes or computing income taxes.
Closing Cost Help
Seller offers of closing help are common in this area. Such credits to the buyer from the seller are a highly effective tool for closing a deal, since the main barrier to homeownership for many people is the initial amount of money they must come up with for a downpayment and closing costs.
The amount of closing help varies in this area with some sellers offering zero help and others offering well north of $10,000. A typical amount in central Maryland is 3 percent of the purchase price. Note, however, that the amount of seller closing help may be limited by the type of financing the buyer chooses and the type of transaction (foreclosure, short sale, etc.).
HOA Dues
Homeowner association fees often are the ugly, unspoken component of a home purchase. Buyers rarely focus on them, but the fees can be expensive and they usually aren’t tax deductible.
These days, it’s becoming more common for sellers to offer to help pay such costs for buyers, at least for the first six months or one year after purchase. If your home has been languishing on the market and showings have effectively stopped, you may want to offer potential buyers the benefit of paying the first year’s HOA fees for them.
Incentives to Buyer Agents
Finally, what better way to draw the attention of a buyer’s agent – and by extension, the attention of their client – than to offer the agent extra money! It’s probably no surprise to you that realtors like money. So, as a seller, why not offer a specific cash incentive to buyer agents to push your property under the eyes of their clients?
Your home may have spent the last eight months stagnating on the market. But it’s likely still as lovely and amenity filled as the day your agent posted it on the MLS.
A price reduction may push your home back up the list of properties to be noticed. But offering a $1,000 cash bonus to agents who bring you a signed contract offer by Oct. 1 (or any other specified date) may have the same effect. And be a cheaper alternative.
The point is to get as many buyer agents as you can selling your house for you.
Jerry Kline is a Realtor with the Odenton, Md., office of Keller Williams Flagship Realty (1216 Annapolis Rd., Odenton.) For more information on the local real estate market, contact him at (443) 924-7418, or visit his blog (www.JerryKlineRealtor.wordpress.com) or website (www.JerryKline.kwrealty.com).
Short Sale Rush Is On
Banks are realizing that short sales can be more profitable than letting homes slip into foreclosure, so they are becoming more willing to do them. Short Sale Rush Is On
Man Waives Trial in Kidnapped Agent Case
He allegedly lured the agent by saying he was interested in viewing a home for-sale that he saw in the newspaper. Man Waives Trial in Kidnapped Agent Case
How to Get More Accurate Appraisals
Be there and provide the appraiser extra information! How to Get More Accurate Appraisals.
Trump: "This is the Time to Buy a House"
In an interview yesterday on CNBC, Donald Trump was asked his thoughts on the country's current housing market climate. Here's a partial transcript of that interview. "TRUMP: There are great opportunities in real estate, especially if you're somebody looking to buy a house. I always tell people, this is the time. I tell all of my employees, if you want a house, this is the time to buy a house, and go get it from a bank, because the banks will give you financing, if you buy it from a bank.
CNBC: Donald, how do we get those lists?
TRUMP: You can get them from the banks and the banks hire people specifically to sell their houses. The banks are dying to sell their houses. They do not want them. They're being absolutely mugged by the people that run the houses. They hire security companies to go in and guard the houses, and the security guys are robbing the houses. The banks do not want these houses, and you can make unbelievable deals. I tell everybody that has a mind, go out now, buy a house. Ideally buy it from a bank. If you don't buy it from a bank it's virtually impossible for these people to get financing so buy it from a bank.
CNBC: What about raw land in places like the gulf coast? Do you see much opportunity there?
TRUMP: I love what you said about raw land before. I think it's great. One of the best investors I know is buying out as much raw land as he can in decent locations. You can't go bad location because that's too long. But in decent locations, and in some cases, almost all locations, [buy] because the raw land is selling at pretty good prices right now, pretty good for the buyer. Yes. I think buying raw land is great."
Bank-owned properties are a great deal. Contact me at (443) 924-7418 to get a list of the bank-owned properties in your area.
A Snapshot of Real Estate Activity in Gambrills’ Four Seasons Estates
Real estate activity in Gambrills’ Four Seasons Estates has been strong the first half of 2012, with 14 homes already sold in the neighborhood, five homes currently under contract to be sold and eight homes still on the market.
Four Seasons Estates is comprised mainly of single family detached homes, although there are a few duplexes as well. The average list price for detached homes currently for sale in the community is $300,915. One of those homes, 2264 Four Seasons Drive, is a foreclosure, with a list price of $289,900. Three of the five detached homes under contract in the community are potential short sale transactions.
In terms of Four Seasons Estates detached homes that already have sold this year, the average closing price for the 14 homes is $279,157. However, if the extremely low-priced foreclosure at 2504 Flowering Tree Lane ($174,900) is removed from the equation, the average close price for the 13 remaining homes jumps to $287,176.
Of course, sellers don’t always walk away having collected the full closing price for their homes. Another factor to consider is how much, if any, financial help the seller provides the buyer to close the transaction. With respect to the detached homes sold in Four Seasons Estates so far this year, the average seller help to complete the deals has been $4,525. Five of those sellers provided zero closing help, while another seller provided $11,000.
For more details on the Four Seasons homes sold in 2012, and those currently for sale, see the tables below.
Detached Homes Sold in Four Seasons Estates Since 1/1/2012
MLS #
Address
Close Price
Seller Help
BRs
BAs
Garage
Days on Market
Foreclosure/Short Sale?
AA7310298
2290 FOUR SEASONS DR
$295,000
$7,685.59
3
2
1
706
AA7523058
1045 CHRISTMAS LN
$259,900
$7,782.58
4
1.5
1
679
AA7665235
962 FALL RIDGE WAY
$290,000
$0
4
2.5
1
139
AA7693231
2485 RED FALL CT
$255,000
$0
4
2.5
1
119
Foreclosure
AA7716361
2315 MAYTIME DR
$287,500
$5,000.00
4
2
1
67
AA7721341
90 WINTERGREEN WAY
$245,000
$8,000.00
3
1.5
1
25
AA7753507
1016 CHRISTMAS LN
$292,000
$0
3
2
1
204
AA7756513
2504 FLOWERING TREE LN
$174,900
$0
3
1.5
1
82
Foreclosure
AA7781772
2278 FOUR SEASONS DR
$300,000
$9,000.00
3
2
1
8
AA7811256
976 FALL RIDGE WAY
$290,000
$5,000.00
4
2.5
0
8
AA7818260
2474 RED FALL CT
$299,900
$8,997.00
5
2.5
0
40
AA7825339
1111 RED FALL LN
$302,000
$11,000.00
5
2
0
5
AA7836636
1081 SNOW HILL LN
$315,000
$0
4
2.5
1
2
AA7858331
998 JASON CT
$302,000
$885.00
5
2
0
10
Detached Homes Currently for Sale in Four Seasons Estates
Status
MLS #
Address
List Price
BRs
BAs
Garage
Days on Market
Foreclosure/Short Sale?
Active
AA7708545
2410 SPRINGLAKE CT W
$339,900
3
2.5
2
290
No
Active
AA7758365
997 JASON CT
$283,000
4
1.5
0
191
No
Active
AA7860582
2266 DAIRY FARM RD
$275,000
4
2
0
48
No
Active
AA7860503
892 WINTERHAVEN DR
$299,900
3
2
1
51
No
Active
AA7861557
1030 SPRINGHILL WAY
$349,500
4
2
1
49
No
Active
AA7870191
1113 RED FALL LN
$310,000
5
2.5
2
37
No
Active
AA7886804
2264 FOUR SEASONS DR
$289,900
4
2
1
13
Foreclosure
Active
AA7895351
1008 CHRISTMAS LN
$265,000
3
2
1
178
No
Under Contract
AA7834952
950 SUMMER HILL CIR
$290,000
4
2
0
73
No
Under Contract
AA7838950
1099 SNOW HILL LN
$276,000
5
3.5
1
13
Short Sale
Under Contract
AA7876061
1114 FLOWERING TREE CT
$348,700
4
2.5
1
11
No
Under Contract
AA7880218
2255 MISTHAVEN LN
$285,000
4
2
0
3
Short Sale
Under Contract
AA7682973
2267 MISTHAVEN LN
$300,000
4
2.5
0
201
Short Sale
Deadline Extended for Foreclosed Homeowner Reviews
Homeowners who feel they’ve been wrongly foreclosed on by their lender now have until Sept. 30, 2012 to request a free review of their case. Deadline Extended for Foreclosed Home Owner Reviews
