Did you know that you can sell your home at a reduced commission these days? Real estate trade associations don’t want you to know this and they’ve gotten six states to pass laws that make it a crime to negotiate over commissions. Real estate agents are divided over the topic, but many think it should be up to the free market. A new site called hungryagents.com allows agents to bid on the job to sell your house. Clark loves this idea. There are so many licensed agents in the country and not nearly enough jobs. So how do you build you client base? You negotiate your price. Clark knows people need real estate agents, but he thinks people should be able to pay the commission they want.
Real estate agents are in the midst of a civil war over whether to have fixed or floating rate commissions on properties. The traditional real estate industry is terrified of the free market and the national Association of Realtors is fighting hard to keep things the same. A recent profile in the Wall Street Journal featured an agency in Ohio that started discounting commissions and was basically ousted by other agencies in the area. The Los Angeles Times also featured a story on another agent who has decided to provide full commission service for half the money. How will it work? Basically, the woman will get paid on salary instead of commission. Technically, price fixing is illegal, but the traditional real estate industry ahs been able to fix commissions by browbeating agents involved. But things are changing. Pretty soon you will be able to get whatever level of service you want with a comparable commission rate. No longer will be it a market where you either sell-it yourself or pay full commission to a real estate agent. In addition, the U.S. Justice Department is currently suing the NAR for the price-fixing techniques it pushes. The marketplace needs to decide what happens here, not the real estate industry.
Real estate agents, in fear of losing money, have been engaging in anti-competitive practices in states such as Texas, Oklahoma and Kentucky. In those states, agents are trying to make it a crime for people to use “a la carte” real estate services or to use discounted commission services. Agents have felt threatened by the continual drop in commission, which has dropped from about 7 percent to 5 percent. But with advancing technology, people don’t have to accept traditional ways of doing business. Many are using the Internet help to buy homes on their own or to hire agents for limited help. It’s causing a civil war inside the real estate industry. Some agents are going with the flow and are offering limited service for a lower commission, while others want fixed commissions and anything else is illegal. Why not let the customer decide? Some people still want the full service agents, but others do not. Making it against the law is simply corrupt, though. The Texas Real Estate Commission is the latest group trying to do this, and Clark thinks it’s ridiculous. States should not be allowed to interfere in the free market and should be penalized if they do.
The once-overheated housing market is no longer overheated. In fact, builders are feeling a bit fearful about sales in many communities around the country. Builders have had to cut the price of homes in the L.A. area by as much as $70,000 in order to sell them. When the market shifts, people who aren’t having much luck selling their homes pull their homes off the market. But it’s different for a builder. They must move that house. So, they try to find the right mixture of sales incentives and features to keep houses moving through the pipeline. Several years ago, builders in many hot areas didn’t have to offer any incentives. But it’s all changing now. According to the National Association of Homebuilders, one in three realtors are offering optional items for free. These include flat screen televisions, finished basements and bonus rooms. So, if you’re considering buying new construction, make sure you survey the area you’re interested in and work on an offer with lots of builders. If you’re trying to sell a home that is in a new construction area, just make sure you start with an aggressive price before the market softens anymore. As for the used home market, you tend to get a lot more square footage for your money. Clark prefers used homes because the areas are usually already built up. And remember that if you’re thinking of building in a new development and you’re promised a swimming pool or tennis community, don’t believe it. Builders often promise things that are never delivered when the community is finished. So, until you see it, don’t believe it – and don’t pay for it!
There is a large shift going on in the world of real estate that means much more options for you and your home. The market is splitting up into various sectors that span the range of do-it-yourself sales to full-service agent help. Real estate agents are still key to making the real estate market work. But people are finding what works for them. The market share of companies that offer alternatives is growing quite quickly, and the days of non-negotiable transactions are over. In fact, the average commission on real estate transactions is a little more than five percent today, and you can thank the Internet for that. In a lot of cities, about one-third of home sales are taking place on the Web. That is a very scary prospect for agents, who used to be in complete control of real estate listings and information. So, what are real estate agents afraid of? In the Northeast, they are terrified of Foxton’s, a European real estate agency that pays its agents salaries instead of strictly commission. Foxton’s agents get about 3 percent, compared to the typical 6 or 7 percent that regular agents get. There are some agents in the Northeast who will not show a Foxton’s listing because they get a smaller cut of the deal. But there are also agents who are more forward thinking about their services and the real estate industry in general. They’re willing to take a lower commission for fewer services. Some even have prices lists with a la carte services. For example, you handle the open houses but the agent takes care of the listing. There will be more and more of this coming our way because the Internet has democratized information. Traditional real estate agents will try to fight this movement, but it’s going to happen regardless.
The real estate industry is going through some massive changes lately. Information is becoming more available to the public, and consumers are able to look at listings with or without the help of an agent. It’s leading to more blended sales, where FSBOs and a la carte pricing are involved. Traditional real estate agents are very unhappy with this new pricing model, and some are striking back. The New Hampshire Association of Realtors is going after an organization that helps people get discounts called “I Sold My House.” Realtors are claiming that the group is acting as an unlicensed realtor. But in doing so, the realtors are helping spread publicity about this organization. Real estate agents are simply scared of new technologies and changes. In a free market, you should have the choice of doing business with who you want the way you want.
Clark has hoped for a long time that the traditional real estate industry ceases to exist. He doesn't think people should have just two choices when it comes to buying or selling a home: getting a fully-commissioned real estate agent or doing it yoursel. There has been no in between for many, many years despite efforts of forward thinking companies. The good news is that there are people in the real estate industry who want things to change, too. Daniel Ruben, an agent, deducts two-thirds of his commission to customers who choose limited services from him instead of the full deal. He's basically a broker for agents who are willing to take a reduced commission in exchange for providing fewer services. Similar efforts have been made in New York City where Foxton's, a British company, has blossomed. Agents get about two percent commission compared to the regular 6 or 7 percent. Customers basically get to choose what level of service they want, and Clark loves it.
One of the difficult topics Clark deals with is how to sell a home. Is it smarter to do FSBO (For Sale Buy Owner) or to hire a real estate agent to do the work for you? Many people start with a FSBO and then give up after awhile because it is a huge hassle. Christa, Clark’s executive producer, recently sold her home as a FSBO, but she was ready to give up after two weeks into the process. Dealing with questionable or rude people every week and constantly having to keep the house clean nearly caused her to give up. But she kept with it for another month and finally it paid off. She sold her home after six weeks and ended up saving more than $20,000 doing it herself. But, if she had the sell the house again, she will use an agent. Clark recommends that you stay with a FSBO for three months if you’re going to try it. You will figure out what works best for you.
Clark has hoped for a long time that the traditional real estate industry ceases to exist. He doesn't think people should have just two choices when it comes to buying or selling a home: getting a fully-commissioned real estate agent or doing it yoursel. There has been no in between for many, many years despite efforts of forward thinking companies. The good news is that there are people in the real estate industry who want things to change, too. Daniel Ruben, an agent, deducts two-thirds of his commission to customers who choose limited services from him instead of the full deal. He's basically a broker for agents who are willing to take a reduced commission in exchange for providing fewer services. Similar efforts have been made in New York City where Foxton's, a British company, has blossomed. Agents get about two percent commission compared to the regular 6 or 7 percent. Customers basically get to choose what level of service they want, and Clark loves it.
If you are considering buying a house, Clark urges you to have your own inspection. First-time homeowners often skip the inspection because they think government workers have somehow inspected the house. Although they have, these kinds of inspections are not enough. Think about when a hospital, school or office building is erected. There is a construction manager who makes sure things are being done as they should be. You want someone who does the same thing for you. It's especially important if you're having the house built. And be sure that you don't hire an inspector that your real estate agent recommends. Recent reports show that 70 percent of people hire the inspector recommended by their real estate agent. Agents only suggest inspectors they know will not kill their deal, and that is not in your best interest. You want someone who will kill the deal if the house is not in good shape. Two sites that offer great referrals are ashi.com and nibil.com. NIBI requires that its inspectors carry Errors Inspectors Insurance. This means that if they mess up, they are responsible for it. You also want someone who is CABO certified, which means they are code current. Spend some additional money when buying a house and get an inspection. It's worth it. And before you sign a contract with a home builder, make sure you inspect the contract. Some builders forbid you from hiring an inspector and that wording is included in the contract. So, if you see it in there, give that builder the boot.
When you’re selling your home, should you try to sell it yourself or should you use an agent? What about doing something in between? Most people should hire a full commissioned real estate agent. But if you think you can handle the work on your own, you might want to try out a discount broker service that charges between one and four percent. Some of these are erealty.com and ziprealty.com. Foxtons, which operates in the North East, is charging as little as two percent. These services are getting so popular that traditional real estate brokers have had to lower their commissions to compete. Commission levels are falling to around five percent in some areas, and agents are not happy. In Texas, the real estate industry tried to make it a crime to use a discount broker. It didn’t work, and Clark is happy about that. People should be able to decide what level of service they want. So, how do you decide? If you are thinking of selling a house on your own, you must know that it’s not as easy as sticking a sign in your yard and letting the house sell. You have to figure out how to price the house, how to negotiate, and you must have a thick skin. You need to give it at least 12 week, and when it’s time to get professional services. If you want an agent for certain a la carte services, you will pay depending on what you want.
Clark has heard a lot of bad press about these real estate investing seminars that try to convince people to buy some piece of property that will make them rich. They get you to come to the “free” seminar at a hotel, and then they try to push a very expensive real estate class on you. The classes usually cost $1,500 to $2,000 and are held over two or three days at another hotel. Don’t get him wrong - Clark loves real estate And he’s bought a number of foreclosures and distressed properties. He believes there is potential for wealth over time. But a lot of these hotel road show presentations make it seem as though you will become a real estate mogul in days. The Washington Post assigned a reporter to go to these seminars for an entire year. She then wrote about the number of people who got rich through these presentations. How many do you think got rich? Zero! Most people told the reporter these seminars were a total waste of time. Others thought they were very uplifting and motivating, but they still didn’t make any money. You’re not going to be able to go to a hotel ballroom for two or three days and become an instant expert in how to invest in real estate. One of the biggest companies running these operations filed for Chapter 7 bankruptcy a few years ago. So, stay away from these rackets. What about foreclosures? Even though there has been a big run up in real estate values, foreclosures are still extremely common. Foreclosures are a way for you to acquire a personal piece of property at distressed prices, and often you can find a needle in a haystack. But you have to know how best to buy. The process of foreclosure works differently in different states. But you will hear a lot about people buying property “pre-foreclosure.” This means the buyer swoops in before a home goes through the foreclosure process and buys a house. Stay away from this unless you are a very experienced real estate buyer. You want to buy a property after it’s been foreclosed on. These are called REOs or “real estate owned” foreclosures, and they end up in all kinds of places including HUD, the Department of Veteran’s Affairs, credit unions and even banks. You can also find a real estate agent that specializes in foreclosed real estate. So, check out those resources before buying.
