Empowering yourself when you do work with a Realtor

[SD Realtor]

A few things for you to know when you work with a Realtor. This stuff is rudimentary but I am amazed at how many people I work with who do not know this.

The golden rule:

NEVER LET AN AGENT OR BROKER INTIMIDATE YOU. The DRE is very protective of the public and doesn’t tolerate agents or brokers who bully people. This applies to lenders as well so know your rights.

For Sellers

1 – All commissions are negotiable by LAW

2 – Offering a cooperating commission for the buyers side is a good idea. Especially in this market. Dont be afraid to DEMAND that if your listing agent or anyone in his company represents the buyer that your cooperating commission is discounted. So you can offer 2.5% on the buyers side but if your listing agent also represents the buyer you do not give him the full 2.5%. You MUST make sure this is specified in the listing agreement. If you sign the listing agreement and then try to change things you are out of luck, so do it UP FRONT and GET IT IN WRITING.

3 – There is no law governing contract lengths. Your listing contract does not have to be 6 months. You can make it as long or short as you want. IT IS SPECIFIED IN THE LISTING AGREEMENT

4 – Contrary to what you may have heard, if you ever want to cancel you contract during the listing peried, simply ask your agent to cancel. If the agent says no, then go to his broker. Explain your reasoning and request a cancellation. As long as you are not trying a backdoor deal then you should be okay. Brokers and agents don’t like to cancel but really the law is on your side so don’t be scared.

5 – When you first meet a broker or agent at the listing appt and they tell you they can sell your home for X dollars make sure they show you RECENT comps that support the claim. Demand to see cancelled, expired, and cancelled listings in your mapcode. When the agent claims that they have “extensive marketing techniques” that will sell your home, ask them to show you how many of thier sales resulted from the marketing techniques verses the MLS. The bottom line is that the VAST majority of sales simply results from the MLS. Magazines and brokers tours are SEVERELY touted and I found way way way ove . In short, every claim should be backed up with data.

6 – Ask them for references and CALL THEM.

7 – Interview multiple Realtors.

For Buyers –

To be honest I do not recommend buying right now in San Diego. However many people still need to buy for a variety of reasons… 1031 exchanges, or maybe they just want to buy. Just make sure you understand the market is depreciating and will do so for the foreseeable future. This is just my opinion and many on this site share that view to varying degrees. So if you plan to live in your home for many years to come then okay, go for it. Just don’t plan to sell and see appreciation on your home for several years to come. Indeed it could depreciate from a little to alot depending on the severity of the next downcycle.

1 – PLEASE PLEASE PLEASE make sure you can afford the purchase. Run a budget, have your Realtor generate an spreadsheet for you that has the estimated monthly budget to own a home. Include the mtg payment, property tax, insurance, water/sewer, utilities, just to name most of them.

2 – If you are using exotic or risky financing, (which to me is anything other then a standard 15 or 30 fixed rate vehicle) then make sure you know what your payment will be if rates change and once your fixed period expires. KNOW THE FUTURE! Use sample rate hikes that are in line with different scenarios, best, average and worst case scenarios.

3 – Assuming your budget is okay, once you are ready to start looking talk to your agent about a credit from thier commission. Agents don’t like this but don’t be afraid to ask. I always give rebates. Make sure if you have agreed to a rebate that you get it in writing.

4 – Don’t be afraid to ask your agent to send you recently expired, cancelled or withdrawn listings. These may be primed for a good deal.

5 – If you do see a place you like make sure your agent does a listing history report to see how many price changes have occured for that listing. Also check to see if the home was previously listed and may have expired or cancelled and then relisted.

6 – Come in LOW. I guess I am stating the obvious…

7 – Dont be afraid to walk away. If you make an offer and it is declined then walk away. Check back in a few weeks and watch it. Have your agent call the listing agent and let him know you are still out there.

[Bugs]

It should go without saying that “empowering yourself” does not have to involve abusing your realtor. There’s a big difference between seeking a fair and equitable relationship with the other parties in a transaction and being an ass.

[powayseller]

Bugs, what are you implying? The a** word is completely inappropriate here.

SD Realtor, excellent list. It’s fortunate to have a realtor gives us this type of inside information. My Help-U-Sell realtor did all the stuff you recommend for listing agents. I tried first to negotiate the commission with my ReMax agent, who had sold me the house, but she checked with her broker and said the broker could not allow any commissions below 5% due to the Errors and Omission Insurance. What a bunch of lies! The E&O would run at most a few hundred bucks per transaction, not $6,000. The HelpUSell agent has E&O insurance, and the broker laughed when I told him how much ReMax pretended that had to charge to cover it.

Many realtors lie to the seller, and promise a high price, saying their wonderful marketing techniques and flyers will gather the attention to get a big price. Lies! Over 80% of homes are sold because the buyer found the house HIMSELF on the MLS. He tells the realtor which house he wants to see. Who even looks at the real estate ads in the U-T anymore? Maybe a few old people who don’t have internet access. Anyway, Jim the Realtor had this on his website: agents promise a high price, and after a few weeks, start bringing it down. Meanwhile Jim, who promised a realistic market price, lost the listing. To the shady talker.

SD Realtor, you covered the most obvious scams out there today. Buyers need this kind of knowledge to protect themselves. Good job, good list! Fair to all!

[JJGittes]

As a practitioner in SD, what do you consider low? For instance, say a house has been sitting for a couple of months and is listed at $800-850k. What would you offer these days, assuming your client could not be disuaded from buying right now? 5% lower? 10% lower? more?

[SD Realtor]

Empowering is not being an ass .

Bugs I didn’t mean to imply being an ass to your Realtor. I just have seen alot of cases where people get intimidated by certain Realtors. They seem to forget that the Realtor works for them! Also to remind people that there are an awful lot of alternatives out there for them and trying to point some of them out.

Powayseller did you work with Gordon and Diane Kane? They own the HUS on Poway road and they are VERY COOL people. I know them well as I owned the Rancho Penasquitos Help U Sell a few years back and then sold it.

[Bugs]

Sorry, I wasn’t replying to your post so much as adding to it. Now that sellers and agents are at more of a disadvantage it’s very easy for some people to start pushing the limits of civility, that’s all.

[powayseller]

My realtor was Pam McCormick, and the broker was Gordon Kane. Pam was new in the business, so Gordon came along to several appointments, as well as reviewing the contracts/offers. I liked him immediately.

[SD Realtor]

I know Pam as well! Yeah Gordon and Diane are very nice people. Both of them worked for GMAC (One Source Realty) for many years. Then he bought the Poway franchise a few years back. He also bought a downtown HUS and then he sold that recently. Definitely a low key down to earth type. I am glad you did well! Having more people like him in the industry would be nice.

[powayseller]

I guess that explains my affinity for realtors. My other realtor was Cindy Ellison from ReMax in Rancho Penasquitos. Great experience also. I’ve had real good realtors in my life.

[SDbear]

SD Realtor,
Thanks for the excellent info. I’m a complete novice with regards to the RE transaction process. Sorry for bringing up these basic questions. Can someone explain the exact role of agents, brokers and realtors (I always thought they are all the same) during a real estate transaction? Also if a buyer sees an interesting listing on the MLS and directly contact the listing agent, can he demand the 3% towards the buyers agent? What drawbacks do you see with this for the buyer?

[Farls]

Powayseller…Several times you have posted the summary from that previous article saying that 80% of buyers buy a home that THEY THEMSELVES FOUND on the internet. That is wrong…and it’s not what the article says. If you can still find a link to that article it says that 70+% of homebuyers SEARCH for homes on the internet. There’s a big difference between simply surfing for homes on the internet and actually finding the one specific home that they end up buying. I think you have twisted the article (not on purpose…but it’s been mentioned by you numerous times)to lessen the work that the Realtor does to match the buyers particular budget, wants and needs to that of the specific home they end up buying.

SDR…nice post…great info….

By the way…today I’m posting from Phuket, Thailand…what a beautiful day at the beach today…

[powayseller]

Farls, thanks for the correction, my mistake. I was told that 80% of buyers look for homes on the internet.

What’s really cool now, is the realtor has you on automatic e-mail updates, so when a new listing comes on the MLS with your criteria, it is e-mailed to you. Buyers come to the realtor with a list of homes they’d like to see. The realtor adds value to this by adding to this list, showing the buyer other homes that the buyer never thought of.

[powayseller]

Does it really help to raise the buyer’s agent commission, as this U-T syndicated article says?

I was told that “about 80% of buyers are searching the internet for homes. Since most of the sites they look on are direct feeds from the mls it is safe to say that when they buy they are buying homes that they have seen on the nternet Also, they estimate that about 70% of buyers and sellers are
finding their agent on the internet.”

My realtor friend went on to say that to prove his point, “I searched 6 zip codes for solds by commission and guess what. There is no evidence that a higher buyers commission got the seller any more money. As a matter of fact in many cases the avg selling price of the higher commission was lower than the lower commission. The internet is radically changing this market and we are only seeing the beginning.”

So for the realtors out there, what happens if your buyer wants to see a house that is paying less than 2.5% commission? Will you try to talk your buyer out of looking at that house? If a house your buyer did not seek out is paying 3.5% commission, will you suggest that you all swing by and have a look? What is your experience with the importance of commission? I would think it has an effect.

[SD Realtor]

In response to SDbear –

Never apologze for basic questions!!

My answers may not be law but here is my take.

Basically to buy and sell real estate or mortgages in the state of California you need a brokers license.

Now a broker may hire agents to work for him/her and they can represent buyers and sellers to help sell real estate.

The criteria for obtaining a brokers license is more stringent then a sales agent license. To get a sales agent license you take a few rudimentary courses and then take the test. That gets you a conditional license. Once you have that and complete another course your license is no longer conditional.

Now once you have your sales license, or even your conditional sales license you can go work for a broker. Typically brokers employ lots of agents. Now even though each of those agents may have several listings, the actual listings ALL belong to the broker. The broker is ultimately responsible for the listings. A typical Coldwell Banker office may have a few brokers and 10 to 100 agents!

The criteria for getting a brokers license is that you first get a sales license, then there are several courses to take, then you may take the test for a brokers license.

A Realtor may be a sales agent or a broker who is a member of a local association of Realtors. A Realtor is not a licensed designation by the state Dept of Real Estate. As a member of the San Diego Association of Realtors I pay dues and I attend classes offered by the Association. In general it is good to make sure your sales agent is a Realtor. Realtors generally have a higher regard for ethics and have taken more classes, seminars, etc then sales agents and are more experienced and knowledgeable.

Brokers can also sell mortgages and can be involved in financing. Indeed, some brokers don’t know much about real estate at all as they simply got licensed and then went right into the financial aspect of our profession and do nothing but loans

Most of what you learn on the job in real estate is when you are hands on. At least it has been in my case.

****

The law about commissions and real estate in general varies. In San Diego, a principle (buyer or seller) cannot receive a commission directly. Here are some of your options:

1 – have the listing agent represent you and ask the listing agent (or the sellers) to credit you a portion of that commission.

2 – same as 1 but ask the agent to have the sellers reduce the sales price by some or all of that commission.

3 – find yourself a buyers agent and ask that buyers agent to do the same as 1 or 2.

One pretty popular misconception is that when people deal directly with the listing agent they will get a smoking deal. That is speculative at best… In many cases that listing agent will receive full commissions from the seller for both sides without a discount being applied. It all depends on what the listing agents broker will allow the agent to do. You really never know. Also many a time I have spoke to a buyer who felt they were not represented well by the listing agent who was also acting as thier agent. They felt that basically the agent wanted to just get the deal done.

I am not saying this is the norm, I am just saying it has happened. Personally I would recommend to get a buyers agent who will pass on a credit of that commission to you. That way you can feel good about your representation.

Hope this is helpful. If you have more questions email me at [email protected] and I will be more then happy to answer your questions or at least help you find more info.

[SD Realtor]

Farls –

You are in Thailand and I am roasting here in Mira Mesa while my 18 month old throws pieces of tomatoes at me. Needless to say I am jealous.

Powayseller –

Good post above. When I take a listing one of the very first questions I get is what should we offer the buyers agent. My standard answer is to offer what the majority of your competitors are offering. Before you guys jump all over me, I know that is not a great answer. So I get on the MLS and show the client what all the comps in his neighborhood are offering. In most all of the cases the norm has been 2.5%. Now I have had a few clients that asked me to list 2.0% and I did that. Now one thing I do for all listings is tell the seller that if I represent the buyer I will do so for only 1%. ANYONE selling thier home should make sure the listing agent does this.

When I do represent a buyer I would be a liar if I said that I wasn’t happy bigtime when that cbb is a 3.0 verses a 2.0 but I never discourage or don’t show the listing. Like you said, the consumer is SO EMPOWERED now by access to information. More often then not my buyers are sending me MLS numbers they pull up rather then the other way around.

Now my life is so busy that no I never show a buyer a place that he didn’t seek out even if they are paying 10% commission. Nor would I talk a buyer out of buying a home that is only paying a very low commission. So many of my leads come from referrals that I really try to focus on what the buyer wants, not what is best for me. Now when I rebate a buyer I do have a baseline of what I need to make on the commission. For instance I like to make sure I at least get 1.5% commission. So if someone is offering only 2% commission then I will only rebate that buyer .5%. If they are offering 2.5% then that buyer will get a full point.

Now this is just me, and unfortunately many people in my industry feel I devalue the profession overall by acting in that manner. If the median home was 250k I would agree.

I will tell you though while being a listing agent I have had many clients who want to offer a low cbb like 1% and I will decline the listing. My bread and butter does rely on the traditional large brokerages and it is not in my best interest to alienate them. For people who don’t want to pay out a competitive CBB I advise to call Jeff Karchin or even do a FSBO.

There have been ugly cases as well. I have on more then one occassion received calls from buyers agents saying, we really like your listing but we are looking for a bit more CBB. That is just lame. I politely tell them that I will forward that request to the seller and I do.

So to summarize, I do in general agree with your statement. I do not feel there is any hard data that shows the higher commission yielded better results or faster sales. Yet I do feel that the most competitive way for me to market the listing is to offer a CBB in line with everyone else. I just don’t have the hard data to back it up. So far I have never recommended anything over a 2.5. I have done a few 2.25 and a few 2’s.

I will say this… 2 years ago you would go to brokers tours and there would be 20 or 30 people pitching the home and a hundred buyers agents. Now it totally reversed. The pitch sessions now take 90 minutes and there are TONs of listing agents all pitching to each other. More evidence of a saturated market.

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