Certainly, we are all aware that Real Estate fees are negotiable and that there is no set standard for the services of a REALTOR. Mind you, that does not mean agents are under any obligation to deviate from their stated rates, but it does mean that what Agent X quotes for his services is not to be mistaken for what Agents Y and Z might charge for theirs. That piece of legal housekeeping out of the way, there are means at your disposal for securing the best possible value on professional service from your agent. Follow this simple list of Do’s & Don’ts, compiled over the course of eleven years in the business, and you will give yourself the best chance at securing the lowest commission rate to go along with the level of service you demand.
- Refer me business. This one goes at the top of the list for a reason. In a commission based existence, new sources of business are my lifeblood. While it seems patently obvious, many simply don’t think about sending potential clients to their agent unless prompted. The primary reason that the fees in a Real Estate transaction tend to be high is the risk to the professionals involved. Mitigate some of the risk in an “eat what you kill” profession by helping me find my next paycheck, and I am more likely to reward the added security with a concession of my own.
- Provide me with repeat business. Unlike the wireless companies who are always offering deep discounts to new customers, I am far more likely to offer a lower rate to an existing client than the man off the street. As multiple transactions from a loyal client over the years will eliminate much of the reliance on cold business lead generation, we agents consider the client for life the holy grail of financial security.
- Be pleasant to work with. Touchy-feely as it sounds, no one likes working for a Napoleonic boss. I deal with all types in this business, but I’m more apt to offer a better rate to those I’m eager to assist than the rabid seller in the Hannibal Lecter mask.
- Do your homework. While I will inevitably have to help you unlearn a few things that you’ve gleaned from your internet sleuthing (amateur home evaluation via online calculator, anyone?), an educated client saves me time. That is additional time I can direct to procuring new business or coddling less prepared clients.
- Provide me with an excellent product to sell at my recommended list price. Some listings are simply creampuffs. Beautifully appointed and priced right, I know without a doubt that it is going to sell within 30 days on the market. While I will earn my keep in establishing value and marketing to fetch a top of market sales price, such creampuffs are the closest thing to money in the bank that this profession offers. I’m not adverse to reducing my normal fee if it means planting a sign in the yard of a home that will sell quickly and generate a ton of buyer calls (new potential business).
- Purchase with an eye towards future resale. This is an offshoot of the previous item. When looking for a new home, many buyers focus exclusively on their needs and budget. This is a mistake. Future value potential and desirability of the property across a broad spectrum of buyers is critical to not only your return on investment, but to its appeal to Real Estate agents as a listing sometime down the line. I won’t turn cartwheels when you call me to list a home for sale with a funky, unpermitted addition. A tough property to sell means no discounted rate.
See the pattern here? The idea is to give a little to get a little. Take away some of the financial risk associated with the job, and I can work with you on the reward. On the flip side, there are surefire ways to relegate yourself to the going rate. Avoid the following list of don’ts unless you enjoy talking yourself out of a deal.
- Ask me what I charge in advance of an initial consultation. It is human nature to want to cut to the chase, but lacking context, I have no idea whether your home is a creampuff or a dud. Further, demanding to know what I charge without giving me the opportunity to outline what services I provide for that fee raises a red flag. It sets an adversarial tone and tells me that you are likely going to be a grinder. Until you give me the opportunity to see the property, and/or you present me with a special circumstance that might make me amenable to a discounted offering, you are going to get quoted the standard fare. If anything, I might even quote a slightly higher fee than typical as I have no idea what I’m walking into.
- Haggle with me. There is certainly no harm in asking me about my fees (how could you agree to do business with me without knowing the costs, after all?), or asking if I would be willing to reduce them. Instead of trying to junkyard dog me into a lower rate, however, offer me something of value (see list of DO’s) in return. I don’t respond well to coercion, and I negotiate for a living. Give me a reason to reduce my rate, don’t blindly demand it.
- Own the only million dollar home in a $250k neighborhood. You must purchase and remodel/renovate shrewdly. Making poor initial purchasing decisions, over-improving for the neighborhood, or otherwise rendering your home difficult to sell is the single greatest saboteur of a better deal from me. Signing up for 6 months of marketing on an unsalable property will not put me in a generous mood. You’ll pay full boat, if I opt to take the listing at all.
- Play me off of other agents. It’s the oldest trick in the book, and one I can see coming a mile away. Fear of loss is a powerful motivator, just don’t be so obvious about it. A well-placed mention of the upcoming interview with another agent will work better than a full frontal assault of “Agent B said she’d list my house for ___%.” I know that I am likely competing for your business, and factor that into the rate I quote you. A subtle reminder won’t hurt, but a mugging will make me hold tight to my wallet.
- Approach me on one of my listings directly under the misguided belief that I will reduce my fee if you do not have representation. This bothers me on principle. I may offer a cooperating broker a percentage of my fee to produce a buyer, but under no circumstances does that percentage vanish or adjust if I am the only agent involved. I am actually hesitant to handle both sides of the transaction, as it opens the door to twice the transactional liability, and certainly will not double my workload for free. Regardless, this tactic is akin to cutting your nose off to spite your face. Go get yourself an agent of your own who will negotiate a better deal for you rather than dinking and dunking around with a percent or two of agent compensation. Think big picture.
- Ask me to reduce my fee if I find the buyer without the involvement of another agent. This is the flip side to the previous entry. Yes, I stand to earn a larger fee if there is no other agent involved in the transaction, but this approach is problematic in that you are essentially providing me with a disincentive to find your buyer myself. Why would I bust my behind and open myself up to the greater liability of handling both sides of the transaction for no additional reward? Such a commission arrangement essentially directs your agent to the couch, where he waits with feet up on the ottoman for a buyer’s agent to do his job.
I abhor the phrase “win-win.” So overused and misapplied to a business transaction. We are not Real Estate mediators, after all, but agents tasked with securing the best possible terms for our clients in the sale of real property. When it comes to the relationship between agent and client, however, it is the appropriate cliche. If we are to function as a cohesive unit to satisfy mutual goals, there are different routes to the “win-win” scenario. No need to butt heads when we each have things of value to offer in exchange for that which is most important to us. For consumers, that means making your agent’s job easier and directing future income potential his way. For agents, that means rewarding that consideration with quality, professional service at the lowest possible rate of compensation.
Symbiosis … it’s a beautiful thing.
Times were a buyer could reasonably anticipate that a seller would provide a one year home warranty policy with the sale of a home. Given the equity crunch that many are experiencing, and the prevalence of short sales and bank owned homes in the current market (which typically do not provide such policies), home warranties have gone the way of the buffalo as a throw-in to a Scottsdale home sale. With the lack of disclosures and repairs that accompany distressed property sales, however, such protection has never been more important. With that in mind, we are offering the following October promotions in addition to our always competitive rates.
Free Home Warranty Policy – Register to utilize Paul Slaybaugh’s services as your buyer’s agent prior to 10/31/10 and receive a complimentary one year home warranty policy with your purchase at the close of escrow. See below for additional terms and limitations.
Free Home Warranty Policy For Your Buyer – Want to stand out from the competition by offering a home warranty policy to potential buyers? I understand the equity pinch may not make such overtures possible. Let me do it on your behalf. Register to list your home for sale with Paul Slaybaugh prior to 10/31/10, and I will provide your buyer with a complimentary one year home warranty policy at the close of escrow. See below for additional terms and limitations.
Additional Terms: Promotion valid with website registrations prior to October 31, 2010 only. Close of escrow must occur prior to 10/1/11 for offer to remain valid. Promotion is offered exclusively and may not be combined with any other offer. Maximum value of $325 per policy. Not responsible for cost of additional coverage over and above $325. Not redeemable for cash value. Utilize registration form below to qualify.
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Note: The following is the opinion of Paul Slaybaugh only, and, therefore, patently correct.
Unless you are trying to get under a specific price barrier, you are better off leaving your asking price alone than making a minuscule reduction.
Sounds contrary to logic, doesn’t it? And contrary to the groveling we agents typically employ to wrangle an unrealistic seller into the wakeful world. Why on earth would the guy who has been hammering you on price from the listing’s inception reverse course now that you are willing to acquiesce slightly?
Because a 5k price adjustment to a property that needs to come down 50k sends a signal to buyers, and not the one you think it does. Assuming I did not hit the hooch prior to the initial listing consultation and abet your decision to list the house for $404,900 (thus making it entirely likely that the eventual buyer for your house is not currently seeing it due to his searches being constrained by a 400k ceiling), such insignificant tinkering with the price essentially puts buyers and their agents on notice that you are not all that open to negotiation. Shaving a few measly bucks off the list price is equal parts admission that the current pricing isn’t getting it done, and revelation of an unwillingness to give up on the sales price targeted.
That’s a sales molotov cocktail.
If you move your listing price from $425,000 to $419,000, everyone and their mother knows you are still looking to command upwards of 400k.
Perhaps this is the message you hope to impart, but it makes you appear even more recalcitrant than you did prior to showing the modest reduction. Of the two primary goals of price adjustment – attracting a new group of buyers, and re-energizing those who have already seen the home – you accomplish neither. Adjustment for the sake of adjustment isn’t going to fool anyone and should not be prescribed haphazardly. It is just going to perpetuate the belief that, even upon further reflection, your opinion of value is not compatible with reality.
Many times buyers and their agents will put a home on the watch list if it appears to fit their needs, but is overpriced. That very first price reduction goes a long way in their determination as to whether your home is to be a viable contender. If you show a meager concession after 90 days on the market, they will intuit that you will not be open to an offer more in line with current values. Further, at the current rate of adjustment, it will take another 2 years for you to eventually work your way down to where you need to be. Adios muchachos, it’s on to the next contender for them.
If you really have no flexibility to drop your price, you are better served to keep them guessing as to your motivations and likely openness to negotiation. Better to show nothing than to show you are thinking about haggling in cents when the buyer is thinking in dollars.
If you need to reduce your price to break into the appropriate buyer demographic, bite the faux-equity bullet and do it. Doing so piecemeal not only alerts potential buyers to your likely miserly approach to negotiations, but robs you of the impact an appreciable change brings.
I know you don’t want to give your home away, and I would be derelict in my duty to let you do so. Just bear in mind that you cannot give away that which you don’t have. If your list price does not reflect current market value, you are fretting about closing the door on money that was never yours.
If you need to make a price adjustment, make it count.
That is the G rated version.
The working title was initially more along the lines of:
“What the &^%$ Do You Mean the &^%$#&^ House Is Under &^%$^&# Contract? The &^%$#$@ Listing Says It Is &^%^&#%$ Active!”
There is little more frustrating to the do-it-yourself consumer than outdated data. It’s hard enough to navigate unfamiliar territory with an accurate map, but it’s downright infuriating when that map is hopelessly obsolete. Like punching in the street address to the nearest Starbucks and being warned that there be dragons beyond the intersection of Hayden and Shea. A modern expedition requires modern cartography.
And yet, with the technological onslaught that has shifted the landscape of Real Estate practice, we still suffer from the “garbage in, garbage out” axiom that stifles growth in all human endeavors. All too often, an online home shopper comes across that perfect home that is everything he or she has ever wanted in a house … or rather, it would be if it were actually available.
Son of a &^%$!!!!!!!!!!!!!!!
Before converting your Nissan Murano into a makeshift scud missile and driving it through the listing brokerage’s plate glass window, humor me for a moment.
Once a buyer and seller successfully negotiate a purchase contract here in Scottsdale, with all terms and conditions agreed to and ratified by each party, the listing agent has two choices: change the listing status to “Active With Contingency” or “Pending.” Whether the home remains visible to the consuming public depends on which selection is chosen.
If the home is updated to reflect “Active With Contingency” status, the home remains on the market while the transaction is shepherded through the escrow process. Whether the contract is subject to the buyer’s financing, inspection, ability to sell another property, etc, there are certain contingencies in place that must be satisfied prior to closing. During this time, the seller can market the home for backup offers if he or she so desires. By essentially keeping the home in active status, but disclosing the presence of an existing contract, a seller does exactly that.
If the home is listed as “Pending” once an offer is accepted, it is removed from the market while the escrow is processed. In essence, the seller and listing agent are telling the Real Estate community to cease showing the home and that backup offers are not being solicited at this point.
With those two primary options serving as the choices for listing agents and their clients, you can imagine why many opt to go with the former. With the challenges buyers face in obtaining financing, in addition to typical inspection and appraisal concerns, some consider keeping the home available for possible backup offers the biggest no-brainer since all-you-can-eat ribs.
I actually prefer to utilize the “Pending” status as it shuts down the Days On Market accumulation that can stigmatize a property in the event that the transaction explodes, but that is another post altogether.
The truly baffling thing is that the public is not generally privy to the “With Contingency” part of “Active With Contingency” status. Take your pick amongst several possibilities and/or conspiracy theories as to why the listings displayed to consumers online will show up with no differentiation between the two entirely different categories, but the upshot is that you often stumble upon interesting properties that haven’t really been available for weeks, if not months. Just be aware that it’s no trickery being undertaken by the agent whose site search you are utilizing. While some industrious types might theoretically thrive on creating such confusion to create their own clarifying need, most of us are just as annoyed by the data disconnect as you are. We’d much rather the information that is disseminated be 100% correct and up to date than to field calls that lead to inevitably frustrated consumers. It’s simply a limitation of the information that is parsed out by the local MLS.
So there you go. Every home you come across online is available to purchase. Except those that aren’t.
On behalf of the industry, my apologies for rewarding your self-directed internet search for new construction in Scottsdale with a map of Pangaea.
Give me a call or shoot me an email if you want to request current availability on any and all “active” listings you come across online.
If you were to stand in the center of Scottsdale and spit in any direction, chances are good that you’d hit a home with negative equity. Thus if you’ve been shopping for a home, chances are equally good that you have come across a short sale listing or fifty along the way. If you are willing to subject yourself to the short sale process for the right home, there is a mental hurdle that must be navigated when sitting down to draft an offer.
Prevailing wisdom holds that a Scottsdale short sale seller doesn’t give a fig about the ultimate sales price. Seeing that he won’t walk away from the transaction with one wooden nickel in his pocket, what would he care about the size of the loss that the bank(s) that holds his mortgage takes? The same bank that qualified him to buy a $750,000 home with zero down and an adjustable rate on a stated income loan. The same bank that bilked him of taxpayer bailout funds while he’s stuck with that albatross of a house. Screw the bank. He’d gladly facilitate a deal that calls for the lienholder to absorb as large a loss as possible while carving his initials in the front door on the way out, right? Right?
Not so fast, Johnny Oversimplifier.
There are several reasons why a seller with an interest in actually completing the transaction will attempt to negotiate the most favorable terms from his side of the table. First and foremost, the seller wants to submit an offer to the bank that has a chance of succeeding. If you come in with an offer of $200,000 on a $400,000 short sale listing, there is little chance that approval from the bank (the ultimate decision maker in the process) will be forthcoming. Knowing that, the seller will not be receptive to tying the bank up with an unrealistic offer. The higher the price the seller can negotiate before the package is sent to the bank for approval, the better the chances of getting out from under the house.
While gaining approval constitutes the lion’s share of the concern a seller will have with your supremely low offer, the approval itself will raise additional considerations. The larger the loss the bank takes, the larger the possible tax ramifications the seller faces for the forgiven debt (The Mortgage Forgiveness Debt Relief Act of 2007 has limitations on residence types and amount of the debt forgiven). Further, assuming full release from the lien is obtained from the bank once an offer is approved (something that cannot be taken for granted and should always be reviewed by a Real Estate attorney prior to ratification), the seller may be asked to bring additional monies to the table as part of the approval. Especially in instances in which there is more than one loan, the larger the loss, the more likely one of the banks will try to shake the seller by the feet to see if any loose change falls out of his bank account at closing.
Long post short, the seller has legitimate reasons to negotiate in full capacity against your initial purchase offer. Just because he stands to gain nothing in terms of cash at closing, he does stand to gain substantially. A new lease on life and release from the responsibilities of an underwater mortgage are pretty high stakes, after all.
Moreover, the seller that willingly accepts your lowball offer without a fight might not be interested in actually selling his home. There is plenty of gamesmanship and hidden motivation at play in the short sale arena at present. Your low offer may be forwarded to the bank merely to stall foreclosure. Knowing that it will never gain approval, the seller buys a little more time for rent-free living while the bank processes the file and ultimately returns with a rejection four months later.
The seller who counters your initial offer is doing you a favor. Not only is he demonstrating an interest in a successful conclusion to the sale, but he’s giving your offer a chance. If he signs off on your lowball without a fight, he is just prolonging the agony.
I’d recommend getting comfortable in that studio apartment you are renting if you are floating lowball offers on Scottsdale short sale listings.