Monday, July 1, 2013

Buy Now or wait until next year when I have more money to put down?

Today I came across two buyers that are debating on buying now or waiting until next year when they will have more money saved up to put down.  One buyer has been putting off their purchase for the last two years waiting for the market to come down. What has this cost him? Not only his bargaining power but also his buying power.

Bargaining Power because in the market this year compared to last year there are multiple offers on each property that he has offered on which means that he no longer is able to offer at or less than the list price, but net the seller at or above the list price with competing offers.

Buying Power, because property values have increased in some areas 15-30% above last year and with the recent increase in interest rates of 1% this has decreased his ability to qualify for the type of home that he wants because now the payments are too high.

Both buyers decided last year that they wanted to save up more money to put down so that they could get a Conventional Loan instead of an FHA loan to save on the mortgage insurance but that extra 1% interest rate is a lot more than the .01% upfront Mortgage insurance increase which on a $200,000 purchase equated to $15/mo ($5400 over the life of the loan). The 1% jump in interest rate is a difference of $115/mo or ($41,400 over the life of the loan). In this market it is important to weigh all options and look at the long term picture. You have to pay mortgage insurance on both FHA and Conventional if you don't have a 20% down payment. Interest rates are higher on conventional which, in some cases, make the payments exactly the same. Some buyers are concerned about FHA loans now because the Mortgage Insurance is now for the life of the loan whereas before it could drop off if you have 78% equity in the home after 5 years. Well if you bought your home in the last 9 years, there is no way you have 5% equity if not any at all, especially if you bought your home with the old FHA loan in which you could also borrow the down payment (Nehemiah). So what difference does it make if you have the mortgage insurance for the life of the loan because the chances of you having the same loan or even the house in 30 years in slim to none. You will refinance down the road or even sell the home within 5 years so any equity you have in the home, unless you are throwing huge chunks at your mortgage, will go to your next home when you are ready to move up.

So, in conclusion, my advice to you is...Buy NOW!!!! In just the last month, the buyer looking at a $255,000 home now has to buy a $240,000 home just to keep the same payment. He couldn't even find a home that he liked in the $250,000 range let along the $240's. Interest rates are still low, and prices are rising which means that you will get the equity in the home as the market still appreciates instead of buying at the peak!

The market is always changing and has it's ups and downs but overall in history the values go up! Real Estate is a long term investment. It is always best to buy when the time is right for you but if you are waiting to time the market just right, it has already passed you by.

Monday, April 22, 2013

Why would an agent Sell your house for FREE???

I just heard an advertisement on the radio that inspired me to write this blog.  The ad says "It is a seller's market and why pay 6% commission when I will sell your house for FREE?" I would hope that an intelligent person would ask themselves A. "What's the catch? Why would anyone work for FREE?" An even better question would be B. "How much is the 'free' service going to cost me in the end"?  There are discount brokerages and agents that will discount their wages and I will tell you why a real estate agent would list your house for free or at a discount and how much it will end up costing you.


A.  These are agents and companies that are too lazy or inexperienced to prospect to find business and are using Seller's who are trying to save a buck to attract buyers and sell them another home because they will make the 3% or more that is being offered by the other listing agent. I looked up the production of this particular agent and less than 1/2 of his listings actually sold, the rest of the listings expired (meaning that the home did not sell during the listing period). This is very unfortunate for the sellers that are trying to get a "good" deal on selling their home because it cost them months on the market and an opportunity to purchase a home that they may have wanted and the energy and motivation to move.

B. You get what you pay for! When you go to Walmart to buy an item, you expect that the item will be lesser quality and you aren't disappointed when you find out that the life of that item was minutes or days rather than years. A lot of times, you end up having to purchase the same item over and over again when in the end, it would've cost you less money had you just bought a quality item for a little more money.  This rings true for Real Estate Agents. When you are looking for a discount in a Real Estate Agent, the chances of your home actually selling are slim to none. And in all of the cases where I have found the listings did sell, they sold for tens of thousands less than they would have if a full service agent had sold their home and actually negotiated for them. Because after all, If an agent can't negotiate their own wages and value, how will they be able to negotiate the equity and value in your home?!?!?

Some good questions to ask an agent before listing your home would be:

1.  How long is the listing period? Unless your home is drastically over priced, 3 months should be a sufficient listing period. A red flag is 6 months to a year and your home is a buyer magnet for the agent to spin off the buyers to sell them something else.

2.  How much is this going to cost up front? Some Companies will charge you an upfront fee to list your home on the MLS. Once they have gotten their pay, they have no motivation to sell your home and will not negotiate for you. When these listings do sell, they are generally in the buyer's favor because the buyer has an agent representing them and looking out for their best interest and the seller is left on their own.

3.  What is your average list to sale ratio? What percentage of your listings sell and what percentage expire? The only way you will be able to verify this information is to ask another agent to look it up for you on the MLS.

4.  What is your average list price to sold price ratio? This is a good way to find out what the original list price is compared to the actual sold price. If it is less than 95% then you are better off listing your home with a full service agent that can sell your house for more money to cover the commissions.

5.  Ask for references (not related to the agent). Ask them for 5-10 references of people that they have helped sell their homes and ask how the experience went.

If all else fails, consider the money that you are trying to save (the actual dollar not a percentage) and see if it is worth losing more than that by selling your home for less money. If it sounds too good to be true...It really is!!! No one can work for free and stay in business, there is a catch!

Monday, March 25, 2013

But they said I will save on the commission If I buy and sell with them...

It is a natural misunderstanding for buyers and sellers to think that if they don't have an agent representing them then they will "save" on the commission.  Recently, I have a client that spoke with a builder that told them that they have a special program for people who need to sell their home who don't have an agent and the builder will sell their home for them. They offered to give the buyer the 3% commission that they would've made on selling their home and will give them 1% towards closing costs or upgrades on the buying side "if they don't have an agent". When looking at the numbers, the builder undervalued the home that needed to be sold by a minimum of the same amount of the 3% to the listing agent on the sale of their home and the 1% on the purchase could've been negotiated by a minimum of 3% by a buyer's agent in addition to the buyer's agent getting paid 3% commission. So did this really save my client by not having me represent him? No, it would've cost him a minimum of 3% on the buying side and 3-10% on the listing side because I will sell their home for a lot more! Who does this kind of a deal benefit? The builder of course! The "model sitter" is representing the builder and their job is to get the builder as much as possible. They also get the full 6% commission if you don't have an agent representing you, in addition you don't have an agent to negotiate on your behalf so they make it sound like you are getting a "deal" by offering you 1% towards your closing costs because they know that I, as your agent, would negotiate 3% towards your closing costs in your purchase and the 3% they are offering you is the amount that they are making by you not having an agent and you are still paying full price for their home. When you are dealing in percentages, it is very important to have an agent show you the bottom line of what you are paying or netting when selling your home. 3% of $339,000 is not a lot different than 3% of $375,000 but the difference to you between $339,000 and $375,000 is HUGE!!! If I can sell your home for almost 10% more isn't it worth the 3% that they are "saving" you?

This also goes for buyers who are buying a resale home. A lot of people try to negotiate with me on one of my listings if they don't have a buyer to save the 3%. If my seller was willing to take 3% less or already had in mind that they were going to pay 3% towards the buyers closing costs, then is that buyer saving anything by not having an agent to represent them? No, I still get the full 6, 7 or 8% commission that I negotiated with my seller upon listing the home (after all, the commission is not negotiated between the buyer and listing agent, but rather the seller and the listing agent), the seller is still netting at or above their expected bottom line and the buyer thinks they are getting a deal by getting the home for 3% less than the asking price. On the flip side, when I negotiate on my buyers behalf and get paid a 3% commission (or whatever is being offered by the seller) I can still negotiate for my clients to save a minimum of 3%-10% depending on what I know is a fair price for the home and knowing the facts about the market. On the listing side, I am netting my sellers 105% of the list price vs. the average agent 95% or less. Why is this? Because of my marketing, experience and skills.

Before you EVER make a "deal" with a builder or agent, find out about the bottom line and have them show you a breakdown and see what the true savings is for you OR just talk to me and I will show you exactly what the benefit is to you to have me represent you.


Thursday, February 7, 2013

What is the cost of Loyalty?

It all depends on who you are loyal to!

This seemed to be the theme today in my appointments.

As we prospect and look for new clients we run into a lot of people who say things like "I would go with you but I have to go with..." because they feel like they owe that person something whether they are a family member, friend, or previous agent.  While I can appreciate loyalty, of course I want all of my clients to be loyal to me and refer ALL of their friends and family to me, I also want them to work with me because they know I will do THE BEST job for them and their loved ones. If the person you are being loyal to is not going to do the best job for you or provide the best service, why do you owe them anything? After all, don't they owe it to you to provide you with the best service and in the end the best results? Just because someone is a family member or friend doesn't mean that they have a clue about what they are doing and generally I have found that consumers just want to go with them so that they will discount their commission. What kind of friend would do that or expect their friend to make less money just because you are friends? Wouldn't you rather have an agent that is going to make you more money and provide a better service because of their experience? It is proven (on many occasions) that if an agent discounts their commission, they will sell your home for less money. They will also focus more of their time with clients that they know they will have more incentive to devote their time to, all the while leaving you wondering "what happened to my agent, why aren't they doing anything for me?"

Some recent examples that inspired me to write about this topic are...

1. J-We knocked on J's door and she told us that she was moving and that she was going to list her home with her previous agent, 'IF they tell her that they can sell her home for what she needs'. So, she wanted us to tell her what we thought we could sell her home for. We obliged and continued to educate J by bringing her comparables on a steady basis for 3 months. When the time came for her to list her home, she let us know that she felt obligated to list with her previous agents even though they did not once provide her any information or try to continue to earn her business whatsoever. They told her that they didn't think that they could get her what she needed (even though we proved to her with market data that we could). She told us that she was going to give them a chance and IF they can't get her what she needs then she will list with us. Poor J will most likely sell her home for $10,000-$20,000 less than had we listed it. Over the last 3 months of following up with her, we became the experts in her area because not only did we educate her, we educated us! Her previous agents are going into the listing blindly.

2. Mr J- Today we met with Mr J who had us come to see his home and give him a value of his home and said "the only reason you are here is because you are the neighborhood experts". Mr J was deciding on if he should list his home with us or his good friend. He thought that we could tell him the price that we thought his home would sell for in the area and then list with his friend for that price. Poor Mr J! Little does he know that the price that I can sell a home for is not necessarily the price that another agent can sell it for. There is a lot more to marketing a home than the price. I will sell Mr J's home for $15,000-$20,000 more than his friend because of my marketing strategy and ability to handle and generate multiple offers. Because of my proven marketing strategy rather than having buyers offer less than the asking price and the seller come down on their price because they have one offer to choose from, multiple offers drive the price up above the list price and the seller has the ability and confidence to accept higher offers.

3. Miss T- Miss T has been trying to sell her home off and on with her previous agent for a year. In the last year while market prices increased and the average days on market decreased to less than 1 week on the market, Miss T had several price reductions, to reduce the price $30,000 below competing homes in the area. When Miss T's listing expired I called her and explained to her that with my marketing strategy and the current price of her home, I could help her to sell her home for atleast $20,000 more than she was asking when her listing expired. Miss T felt that her agent has worked so hard for the last year that she was obligated to re-list with her agent and possibly reduce the price more. I explained to her that an agent earns their wage WHEN they sell the house, not by NOT selling the house. Even after some very logical explanation Miss T said she would give her agent one last try FOR 6 MONTHS!!! I explained to her that I never take a listing over 3 months and IF I don't sell her home in 1 I would let her fire me! Miss T felt that she should be loyal to her agent and give her another chance. Miss T's loyalty cost her $30,000.

4.  Faye- Faye has been a client of mine since 2006. I have sold 5 properties for Faye in addition to 2 homes for her sons. Faye told me today that you can never tell if someone is good at what they do or if they are telling you the truth. She said "Amie, I tell everyone to go with you! I know I can trust you and that you are the BEST at what you do. If only we had met you before we decided to work with our neighbor, She is nice but I would never go with anyone but you! And when my husband dies, you will be selling ALL of our properties." Faye and her husband have lost hundreds of thousands of dollars by working with the wrong agents and trusting the wrong people. Faye knows that the value of being loyal to the right agent is PRICELESS!

I am so thankful to my clients, friends and family who have seen the value of doing business with me and have trusted me enough to refer their loved ones. To me, Your Loyalty is EVERYTHING!!!! And I hope to continue to Earn it!

Wednesday, February 6, 2013

Is it better to have an Exclusive Agent or Many?

Today I got a call from an "investor" looking for properties to rent or flip. When I asked him if he had an agent he was working with he told me he had "several agents looking for properties for him and when they find him one then he will buy it with them and have them list it for him when he sells it".  I talk to a lot of these kinds of people that say If an agent finds me a home then I will have them represent me. This could work against him in several ways. 

Effects on the Buyer's side:

1.  He doesn't have one agent that is committed to JUST looking for properties for him on a daily basis, so he could be missing out on several opportunities. Especially in this market where homes are selling quickly. If the agent isn't looking specifically for homes for him on a daily basis, by the time the agent finds the home or the buyer finds the home, it could already be under contract or have multiple offers on it.
2.  The agents would be sending those same properties to all of the other random people that they don't represent in hopes that they might get someone to buy something. 
3. The agents may only be sending them their own listings, in which the agent represents the seller, so there is no one to negotiate for the investor. 

I have seen these types of buyers pay over market value on properties like these because the agents had overpriced listings and only sold them to buyers that did not know any better because they had no one representing them or looking out for their best interest. They thought they were getting a good investment. I have had to help some of these buyers out of the situation that they got themselves in by not having an agent that represented them and was negotiating on their behalf. 

By having The Lar Team represent you exclusively, you are getting 3 agents for the price of one (which is Free to the buyer). Our team is organized to benefit our buyers so that they have One agent looking for homes for them on a daily basis (Bryan Larsen) who is ready to take the buyers to see a home that they are interested in around their schedule and immediately so that they don't lose that home to other buyers. They will have one agent (Amie Larsen) who has extensive experience in the art of negotiating, to negotiate on their behalf and structure an offer so that their offer will get accepted, even in a bidding war. They have one agent (Lynn Buckway) managing the process once their offer has been accepted to make sure everything goes smoothly and easily.

Effects on the Listing Side:

1.  These "investors" are just listing with an agent based on an agreement to reduce their commission because they got 2 deals out of it. These agents are NOT experienced listing agents, they have discounted their commission just to get a listing or a deal and therefore reducing their quality of service.
2. I have seen on multiple occasions that these investors could have actually sold their properties for more money and in less time had I listed the property. The length of time on the market due to the lack of marketing and experience that their agent has costs the investor more money which sometimes makes it the opposite of an investment.

Our highly effective Marketing Strategy begins by pricing the property right in the beginning. Offering the proper wages to the people that are going to sell the home (the buyer's agents) and Marketing the property to get the highest exposure possible. 

The only reason a buyer or seller would have "several agents" is because they haven't found the right one. There is nothing wrong with interviewing several agents until you find someone with the experience and expertise and personality that will match your needs. Once you have found the Best match for you, hire them and let them go to work for you!

To see our Digital Marketing Strategy go to www.thelarteam.com

The Purpose

The purpose of this blog is to share with Readers information regarding Real Estate, clear up misconceptions and offer tips based on occurrences and experiences that come up on a daily basis.