Tag Archives: Agents

Why I Worked For Free

Why I Worked For Free

And it was time well spent

Recently a man (let’s call him Joe) called me about possibly selling his house. He lives in a nice home which isn’t very old. Joe has been blessed with work and finances, which allowed him to pay off his mortgage. However, he had learned that a larger house, in another nice neighborhood, was being offered for sale privately. It was an older house, but had some newer items like roof and AC.

We talked at length, and had a great conversation. Afterwards, I thoroughly researched Joe’s existing house and sent detailed comparables, giving him an estimated price range within which I felt he could expect to list and sell the house. I also asked him to send me the address of the house he was considering so I could research it as well. He did so right away.

It turned out there was past history in the MLS on the other house. The most recent activity was when the person selling it had bought it themselves. I ran detailed comparables for the subdivision, as it had a good number of sales. That’s when the home’s asking price jumped out at me. I saw right away that the owner wanted an amount that was far higher than even the highest of the comparables. I looked deeper, and discovered that the price paid for the house by the owner put it in the top 5 most expensive houses in the subdivision, ever! At the time of purchase years before, it was the most expensive, by a large margin. Their current asking price was much higher than even that!

To be thorough, and check if other houses outside of the subdivision might support such a price, I carefully searched all of the surrounding area for similar homes. I took a long time, in order to be as accurate as possible. Even with this much larger data set, the asking price for this house was far above the comparables. In fact, the price paid by the owner to acquire the house still fell in the top tier of prices.

I had generated links to the comparables, along with tables showing statistics on both Joe’s existing house and the one he was considering. These went into an extremely detailed, lengthy email explaining all I had done.

In conclusion, I told Joe:

“My truthful and heartfelt advice is to stay put. You have a nice house that’s paid for, and moving to a much larger, older house means more cleaning, and higher taxes, maintenance, and energy costs, even if the house was priced correctly, which this one is NOT!

I’d be hard-pressed to recommend paying even what the owner paid for it when they bought it. I believe the owner overpaid, then unfortunately had to replace the roof and AC. As he said himself, he’s upside down. Keep in mind that it’s not up to you to bail him out of that situation! He and his agent should have looked at all this before making the purchase.

So, here I am talking myself out of a listing, but this is my honest advice. And honesty is how we do business!”

After reading all I had sent, I received a reply from Joe. In it he thanked me heartily for being so upfront with him, and for taking the time to carefully evaluate and advise him on such an important decision. He said he will keep our information handy, for future use.

I spent the better part of my day working hard on Joe’s potential sale and purchase. The end result was to advise that he NOT list his house, or buy the other one. Maybe one day we will do business with him, his family, or friends, but there are no guarantees. However, I had a great feeling, because while I may not see a dime because of Joe, I went to sleep that night knowing I had done my job, and served Joe’s best interests well. That, to us, is the only way to do things.

Don't "give" your listing away!

Don’t “give” your listing away!

Selling a house is serious business, and your needs come first.

If you or a family member were sick, would you:

A) Go to your friend’s son who just got his medical license?
B) Visit the nice old doctor you sort of know, whose practice is slow so he “needs the business”?
C) Get treated by the best, most qualified doctor available?

Of course the answer is C! You want the cure to occur quickly, reliably, and with a low risk of anything bad happening.

While selling a house is not the same as dealing with an illness, it is still usually the single biggest financial decision in a person’s life. As a seller, you are also a customer. You are paying a commission to an agent in order to purchase service, experience, marketing, and representation, with the goal being a fast and successful sale. You do not want any unexpected surprises or expenses, or to wait forever.

You’d think that with the stakes so high, sellers would always choose an agent carefully, and demand the very best. However, we’ve seen far too many instances where owners treat selling a house completely differently from when they seek any other professional service. Instead of acting in their own best interests, sellers sometimes feel an obligation to “give their listing” to an acquaintance, or someone brand-new, or someone whose business is slow, etc. It’s very strange, as such owners somehow overlook the fact that they are about to make an enormous step, one which affects every aspect of their lives. Yet for some odd reason, they forget this, and put their fate in the hands of someone based on a casual relationship, or pity, or guilt. We’ve met people who listed with someone simply because they were the first agent they spoke to, and “felt bad” for not using them. Selling a house is far too important to “give it” to someone based on emotions.

A prime example of why not to do so: Long ago, an old client of ours called to say he was in dire circumstances and REALLY needed to sell his house. He was quiet and apologetic, and said that he’d already told a part-time agent he knew that he’d list with him. He explained that he felt sorry for the agent, and wanted to “give him a shot”. The owner didn’t have much confidence in the agent, as he actually said he expected to be talking to us after his listing was up and the house wasn’t sold! Yet, he still listed with that agent.

The agent put only a brief description and less than 10 pictures on the listing. About half of the pictures were sideways, and the square footage of the house was wrong by a huge amount!

The house was beautiful, and in a desirable neighborhood, but months and months went by and it didn’t sell. We never heard from the owner again, so they obviously renewed their listing in spite of everything. Eventually the house sold, but only after more than an entire year had passed and the owner had reduced the price several times. The owner lost months of valuable time, and thousands of dollars, due to the extra notes they had to pay and the price drops they had to make because of poor representation.

Selling your house is not a charity prize, to be given away to just anyone based on emotions. It is a huge event in your life, with far reaching and long lasting effects. There is considerable potential for things to go wrong, so it is crucial to have someone with the skills, knowledge, and experience to handle your sale, avoid the problems, and bring about a successful closing.

What Your Agent Doesn’t Know Can Cost You Now and Beyond the Sale

What Your Agent Doesn’t Know Can Cost You Now and Beyond the Sale

Getting the right agent is crucial when putting your home on the market.

When you hire an agent to sell your home, you spend quite a bit of money at closing, but what are you actually paying for? It really depends on who you hire and how they perform their duties. Unfortunately, many sellers end up hiring what we refer to as “real estate secretaries” – someone who enters the listing into the MLS, puts up their sign, (maybe) answers calls, fills out a contract, and shows up at closing to get their check. When sellers see bare-minimum service like this, they ask “Why am I paying them thousands of dollars to do so little?” and they are right to question this.

Being well represented as a seller goes beyond not just getting your value out of your listing commission in the form of great marketing, communication, and follow-up. The process of selling a property involves multiple parties, legally binding contracts, and many complex steps before closing, so it must be executed diligently, to avoid the risk of large expenses and even lawsuits. It is your agent’s knowledge, advice, guidance, and experience (or lack thereof) which will make the difference here. This is where the value is found in information that you can’t just get from Google and wing it. A seasoned, thorough, detail-oriented agent will have those skills, which prove to be priceless in many situations.

While these concepts all sound good, let’s look at a real life example which came up very recently. The seller of a property had some previous title work done with a title company and was under the impression that if the buyer used their title company, then the seller would save significant closing fees. So, the seller told the listing agent to mandate that the buyer must close with their title company. First of all, the seller was mistaken about the closing costs, since most closing costs are the buyer’s responsibility and a seller’s fees typically only run $250-$500 at closing, and often less. Far more important however was the fact that by mandating the closing company, the seller (and agent) were actually violating the Real Estate Settlement and Procedures Act (RESPA), a federal law that governs the sale and purchase of residential property. This law “prohibits a seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale.” (Reference: HUD RESPA Section 9) Violating this section of RESPA allows a buyer to sue the seller for up to 3 times the amount of the title insurance, so with a typical title insurance cost of $800-$1200, the liability to the seller is $2400-$3600 (probably in addition to attorney fees etc), all to try to save at most $500.

Not only was I concerned about putting everyone in the transaction in a position to be sued if something were to go wrong with the title, but I also wanted to have a different set of eyes on the title work to be sure that it all gets processed correctly. I emailed my concerns to the listing agent, citing the federal law and the liability vs. potential benefit for the sellers, and the sellers decided that it, indeed, was in their best interest to not push this issue with my buyer. All of this happened in the background without upsetting my buyer and causing them unnecessary stress.

“Real estate secretaries” will not anticipate issues such as this one, and often lead the seller into dangerous territory, where expensive litigation or other financial losses could result. So, when you interview and choose a listing agent, keep in mind that the discount commission charged by an inexperienced agent or one who rushes through everything very superficially can ultimately cost you far more than an agent who has the experience, knowledge, and skills to keep you out of trouble and to maximize your profits at closing.

Good buyer agent

What to look for in a buyer agent

A good buyer agent can guide you through the intricate process of finding and purchasing a house.

In a previous article on this subject, we talked about the advantages of having your own buyer agent when buying a home. Here we will build upon that, and describe the things that a GOOD buyer agent should do for you throughout the entire process.

At the very beginning, a good buyer agent is going to first LISTEN carefully to what you need, want, and do not want in a house. We ask questions and find out as much detail as possible. Looking for a house is largely a process of eliminating those houses that do not meet your needs, budget, etc. It is NOT about finding the first house that seems to work, and getting a quick sale. We take your list of criteria, perform a detailed search based on those criteria, and then screen the results. Agents who devote themselves to their buyers know which subdivisions are declining in value or lie below Base Flood Elevation, etc. Specific houses with major problems are known to us too. We apply our expertise and knowledge, coupled with background research, to weed out the many homes which would simply be a waste of your time. Only then do we send you a list of possible candidates.

Recent improvements in MLS software allow us to send this to you via a website interface, which also gives you control over your search results. After we’ve filtered them, and as new listings come to you automatically, you can evaluate them further, marking them as Rejected, Possible, or Favorites. We are immediately notified, and follow up by getting you in-depth background details on those you deem worthy of a closer look.

In addition to value, condition, previous sales, and disclosed defects, we research flood zoning and much more, including clerk of court and tax records wherever possible!

Here are a couple of actual examples when our research saved our buyers money and major headaches:

1. Our buyer clients had very particular needs in a house. After searching for them a long time, we found one that seemed to fit those needs perfectly. However, during our thorough research, we discovered that the owner had $300,000.00 in personal judgments filed against him, AND that his ex-wife was technically still on the title! This title was clouded beyond all hope, and the house should not have even been listed for sale. The listing agent had no clue whatsoever that these issues existed until we showed them. We were able to halt the purchase process before our clients lost a dime. Normally problems like this would not be discovered until late in the purchase process, after inspections, appraisal, etc. The buyers would have spent a lot of time and money, only to see everything fall apart when the title work was done. By our being extremely diligent and proactive, we were able to prevent that disaster. And, a week later, a much nicer house came up for sale in the same neighborhood, and we had it under contract for our buyers literally within hours, and they successfully closed on it.

2. We took a longtime buyer client of ours to view a foreclosure which had just come up for sale. It was a large house on beautiful acreage, all in flood zone X (the best “no-flood” classification.) It turned out to be very nice, so we researched it in-depth. The house had been “bought” by the bank at sheriff sale about 2 months prior, for about $180K. (The amount of the sheriff sale is almost always meaningless, since the bank holding the mortgage is usually who takes possession of a foreclosed property at sheriff sales.) In this case though, the amount was important. The property was listed on the open market by the bank for about $260K. Our research revealed that the previous owner had a large IRS lien against him. Not everyone knows this, but IRS liens are NOT truly cleared by a sheriff sale. For 120 days after the sale, the IRS has the right to show up, present the new owner with a check for the amount of the sheriff sale, and take possession of the property! For this and other reasons, we didn’t pursue this house any further. We told the listing agent about it, and they said flat out that it wasn’t their responsibility! (This response disgusted us…) I followed it in the MLS, and saw that someone else soon bought it for around $250K, before the 120 days was up. This means that they risked losing $70K, and the house! Their agent either had no clue about the potential disaster, or simply didn’t care. There is no way we would ever put a client of ours in jeopardy like that.

Once the right house has been found, the duties of a good buyer agent are far from over. Our responsibility is to negotiate to get you the best possible deal, while protecting your interests above all else. There are procedures and timetables to follow, and some agents play fast and loose with those rules. Doing so can easily jeopardize your offer, therefore it is important to have a buyer agent who does things the right way.

After a contract is successfully signed, the clock really starts ticking, and many vitally important steps must take place before the sale is ready to be closed. They include: Termite inspection, home inspection, followup inspections if necessary, appraisal, and title work. Each of these is critical in its own unique way, and most can open up new back and forth negotiations with the seller. All must be handled correctly and in a timely manner.

The sequence of all these events is absolutely crucial. These days, appraisals cost about $450. The appraisal should come only after the termite and home inspections have been passed. Do not let a pushy agent or loan officer convince you to order appraisal and/or title work early on in the process! If you were to prematurely spend the money for an appraisal, only to then find out that the house has major defects causing you to back out, you will not get that $450 back. When representing buyers, we always take a very methodical, conservative approach. We never forget that you have money on the line. We start out with the least expensive item, then move on from there. That way, if the sale falls through for some reason, our clients have spent the smallest amount possible. Do understand that there is risk involved with buying a house, and that it is indeed possible to lose some money if the sale doesn’t close. However, that risk can be minimized if your agent gets things done in the right order.

(As a side note, we always recommend getting a thorough home inspection. Spending $300-$400 on a home inspection to find out if a house is full of problems is small change compared to buying those problems for $150,000.00 or much more, and dealing with them for many years.)

Finally, when everything is ready for closing, a good buyer agent will do a final walk-through of the house with you, get you a copy of the preliminary settlement statement showing the monetary details, and make sure you know exactly what to bring to the act of sale. They should also be there beside you at the closing to handle anything which might come up, to answer all your questions, and to review the documents you are signing.

A house is probably the largest purchase you will make in your lifetime, so choose your buyer agent carefully.

Buyer Agents: What to look out for

Buyer Agents: What to look out for

When choosing a buyer agent to help you purchase a home, there are things to look OUT for, and things to look for. Today, we’ll talk about the former.

The job of a buyer agent encompasses many tasks, and when done correctly is not easy. Being a good buyer agent means keeping abreast of the market, constantly searching for possible homes, thoroughly researching those possibilities, evaluating them for you and with you, negotiating the contract, coordinating inspections, and much more. It is a very detailed job and a huge responsibility.

Unfortunately, not all agents work this way, so the buyer experience varies widely. Firstly, there are agents would rather not work with buyers at all, and prefer only to list houses. While this seems strange to us, as we love working with buyers, we think that agents who feel this way are at least honest about it, and far better than agents who don’t like buyer work, but do it anyway. If an agent tells you they prefer not to work with buyers, ask them to refer you to a buyer agent they trust. They will almost certainly be glad to do so.

Many buyer agents find houses for their clients, but only by doing a very superficial search. They typically take the most basic requirements and send the buyer a huge list of properties, without doing any additional screening. Often, this is done via an automatic “set and forget” software function. The MLS system keeps sending search results, with no further action or attention on the part of the agent. The buyer, not having any guidance, usually picks a long list of possibilities from the mass of houses constantly arriving in their email, then calls the agent to come show them. Such a “shotgun” approach is a huge waste of time and resources, yet is very common. We’ve seen agents have people look at 15 houses in a single afternoon! One buyer came to us after being shown at least a half dozen homes by another agent. The problem was that NONE of those homes were eligible for the type of loan the buyer was using! The former agent didn’t bother to check this first, so the buyer lost a huge amount of time in their search for a house. Unfortunately, we see this superficial level of service quite often.

Over the years, we have spoken to buyers who said, “Yes, I have an agent. They told me to just drive all over looking for houses myself and to check the Internet, until I find one that interests me. Then I call them and they come show me the house and write an offer if I like it!” These buyers were doing all the work themselves, with their so-called “buyer agents” simply showing up afterwards to open the door and write an offer. This is appalling, and is the most extreme example of how a buyer agent is NOT supposed to act!

When you are ready to start looking for a house, seek and find a GOOD buyer agent, one who will work hard for you and act in your best interests. If you have an agent, but find yourself doing the work yourself, and/or getting no results or analysis from them, then it’s time to move on. If they are uncommunicative, and don’t seem interested or willing to put forth a lot of effort for you, then it’s time to move on. Good agents are out there, so there’s no need to leave the purchase of your future home to anyone else.

In an upcoming post we’ll describe what to look for in a good buyer agent, and the things they should do for you throughout the entire process.

Having your own buyer’s agent is vitally important, and it’s free!

Having your own buyer’s agent is vitally important, and it’s free!

Clearing up myths about the role agents play in the purchase of a home.

Many people, especially those who have not bought a house before, often misunderstand the way real estate works with regard to agents. That misunderstanding can cause you problems when looking for a home.

Myth 1: I have to call the agent on the sign.

NO! Understand that ANY agent can show and sell ANY listed property! It does not matter at all if the property is listed with a different company. All too frequently, we hear buyers commenting about a house being listed with someone else, and thinking that they “have” to call the person on the sign. Such is NOT the case, and as we will explain below, it is a HUGE advantage to have your own agent representing you as a buyer, and to work with them instead of the listing agent.

Myth 2: I’ll have to pay a buyer agent to represent me.

FALSE! When a seller lists a home for sale with their agent, they agreed to pay a certain amount, usually a percentage of the sales price, as the total commission. That commission is what pays their agent AND yours if you have one. The commission is split between the two agents. Thus, having a buyer agent working for you costs you nothing! A buyer agent not only is free to you, but also doesn’t cost the seller anything extra. In return, you get an agent who represents only you, and not the seller.

If you deal directly with a listing agent, on your own, it makes that agent yours on that property by default. This is called dual agency, and can lead to disadvantages for you as a buyer. First, that agent already has a relationship with the seller, and may have a strong sense of loyalty to them. This could affect you negatively during negotiations. Secondly, now that you know how commissions work, realize that if you don’t have a buyer agent representing you, the listing agent will get the entire commission! This can mean they would receive twice the pay or even more. Greed is a powerful temptation, and we’ve seen several cases where agents in a dual role did NOT work in the buyer’s best interest. Rather, they did everything they could to get the buyer to purchase THEIR property, whether it was right for the buyer or not. Dual agents are not supposed to act like this, but it happens.

This is not to say that all listing agents will act this way when put in a dual role. If an agent is honest, they will tell you up front if their house does not fit your needs, and offer to find you one which does. We do this ourselves all the time when unrepresented buyers call about one of our listings, and it’s not what they’re looking for. They appreciate the honesty, and we then work with them and search for the right house. We have also represented buyers as dual agents when our listing WAS right for them. When we do, we take the role of dual agency very seriously, and diligently protect the buyer’s interests and confidentiality to the same high level as those of the seller. Many clients have trusted us in the role of dual agents, and we have never let them down. If the listing agent is truly honest and worthy of your trust, then using them may not be a problem. Usually however you have no knowledge of who they are. And, if their motivation is about money, not about doing what’s right, then there will be problems.

In general, we believe that a buyer should always have an agent representing them. The duty, obligation, and loyalty of your buyer agent is to you and you alone, and does not cost you anything. It’s the best deal in real estate! A good buyer agent can save you an untold amount of time, money, and heartache, and even help you avoid making a disastrous home purchase mistake.

Next time, we will cover some of the things that a good buyer agent should do for you.