Ethics....Someone is asleep in the guard house.

Several times I've asked my real estate friends if they can justify charging percentage commissions - especially in higher prices.  Let's face it, the seller of a $400,000 home pays $10,000 to $12,000 more in most cases although "commissions are negotiable".  Double that for a $600,000 home and the numbers get crazier after that.  No one has been able to tell me what sellers get extra for the extra money they pay and make sense of it.

Now, if a real estate broker takes thousands of dollars from a seller without pre-listing disclosure or post listing accounting, is that ethical?  No.  No. and NO!  But this unethical activity occurs thousands of times daily and no one questions it.  Who's protecting the public?  It it the various Realtor organizations?  No, they represent the broker and agent members.  Is it state legislators?  Guess not.  How about the Real Estate Commissions around the country?  Nope, they're sitting on their duffs too!  And they SHOULD be protecting the consumers!

Think of this -- if one third of New Jersey owners who sold through the MLS's saved an average of $3500 (both conservative assumptions) it would amount to over ONE HUNDRED MILLION dollars each year.  And nationwide it would reach FIVE BILLION dollars.  How could this be?  How could the legislators and commissioners the public thinks is protecting  them do such a poor job?

Where is this covered  in the National Association of Realtors Code of Ethics?  Can anyone make sense of this one?

Here's Help-U-Sell in a nutshell.

 There are two things to remember before we begin:          

1.) Traditional real estate is AGENT oriented. A broker hires oodles of agents to bring in business for the broker.

 2.) Help-U-Sell is CONSUMER oriented. Help-U-Sell attracts listings by offering consumers fantastic value then passes the buyer leads from the listings to a small number of buyer agents who receive most, if not all, their business from the broker.  

Since the broker, in most cases, does not have an agent to pay on listings we can charge a lower fee and still net more. And since the buyer agents have no marketing expenses and receive most of their business from the Help-U-Sell system they are happy with a 50/50 split. (SSHH - one of the main goals of Help-U-Sell is to attract buyers -- but don't tell anybody).  The result: A low overhead, high net system which has worked for 37 years across the country, the Philippines and countries in South Africa.

It just makes sense and, by the way, we’ve made Help-U-Sell ownership more affordable than ever!

Franchise offered through prospectus only.   www.helpusellfranchise.com

Interested?  Contact Ron McCoy:  ronmccoy@helpusell.com  1-951-334-9021 (Pacific Time)

To Guru or not to Guru. What do you do?

I saw on Facebook this morning that several real estate agents I know are heading to Philadelphia to see a motivator and coach named Brian Buffini.  I attended one his "Turning Points" a few years ago and I must say he put on quite a show.  I've also attended other "Guru's" productions and listen to their tapes.  They teach  motivation, time management and other things and promise that agents will increase your business because of them.  Anyone see a problem here?

One thing the Gurus have no control over is the amount of properties on the market at any time or that will come on the market.  So the only way an agent can increase their business is to take it from someone else.    I get this image in my mind of one agent walking up to another and saying "Hey Mary, I'm going to a seminar next week to learn how to kick your butt....Wanna ride along?.... We'll do lunch!"  Are you kidding?!!

Here's the truth of the matter----there are 3 to 4 times more licensed agents, NOT including referral agents, than are necessary   That's why the average production is about 7 units a year.   Someone who has attended real estate conventions and visits the booths at the trade expo might recognize that about half of what's offered has little to do with actually selling real estate.  Along with the "Gurus" those vendors are part of an industry that feeds off of a million real estate agents, most of them unnecessary, desperately trying to out do each other.  Most agents are chasing the elusive butterfly - just like the latest diet book or golf club that will take a stroke off their game.  C'mon folks, settle down!  The easiest way to separate your self from the crowd is to offer the consumer a fairer and more realistic value proposition instead of running up charge cards and beating your head against the wall.  It's a win - win.  The consumer gets a better deal and the agents can increase their business without increasing their costs.  I just love being part of Help-U-Sell!

Open Houses -- Pros and Cons

There is a lot of discussion around  Help-U-Sell regarding open houses lately.  It has always been in our business model that we offer sellers THE CHOICE to do open houses or not.  If they do and are successful in finding a buyer then they pay a reduced fee since they, the seller, produced the buyer.  (We still handles all the details to close).

Now what if the seller doesn't want to hold open houses.  Should we do them?  Well, that's the discussion!  The pros to the seller are increased exposure.   But if they don't want to host open houses, they probably don't see the value.  The pros to the agent are that they were trained to believe they could find buyers.  But if the visitors to the home also went to 5 other open houses that day they made contact with 5 other agents.  Hopefully the agent is charming and knowledgeable enough to capture the buyer.  

But wait a minute!  What if the agent, instead of hosting the open house, was with his or her family at family activities like soccer, baseball or other sports?  What if they were performing worthwhile activities in their church, civic organization or community?  Wouldn't they meet buyers and sellers there - if not right away then over time?  None of us are in this business for just a day.  We build our business over time and my personal belief is that time with your family is much more important than sitting in a strangers living room hoping your next paycheck will walk through the door.  And, by the way.  In the Help-U-Sell system most offices have sellers hosting several open houses each weekend.  So on Monday they collect the sign in sheets from SEVERAL open houses and follow up with the buyers and benefit from EACH open house -- while they SPENT TIME WITH THEIR FAMILIES!!

I know there will be different points of view here and if hosting open houses is your bag, then go for it.  Now, you can see I am not a proponent of open houses and here's why.  During my 28 years in the real estate business I've learned to value my time and my family.  Here on the Jersey Shore for instance we have 16 -18 warm weekends and less if the weather doesn't co-operate.  Me, I want to enjoy all of them.

But here is the most important point I want to make and it's directed to those with younger children.  There are so many outside influences that affect your children's development that you have little control over.  They include what's on the internet, songs, print and more. When they walk out the front door, well, "It's a jungle out there"!  It is more important with every passing day that you spend every possible moment you can with your children.  Someday you will look back, and realize that the window of opportunity is shorter than you might think.  The most important duty you will ever have on this earth is to be a good parent and, as I said before, I don't believe sitting in a strangers home is more important than time with your family.

Please Follow My Blog

At long last, I was finally able to have my blog page edited so that the "Join" button is up top instead of down in the 4th sub-basement where it was.  Please "Follow" me and, if you have never visited before, take a few minutes to review my posts.  Most of them are out right genius!

Why I share 20% of my commissions to (most) buyers and why it makes sense

When the New Jersey Real Estate Commission  authorized the "rebate" of commissions, as many other states do, I immediately recognized what a great bonus it is to home buyers -- and to savvy brokers.

Although they will swear otherwise, brokers and agents do less for their huge commissions than they did in the past.  This is because most consumers begin their search on the internet and most of the information they need such as taxes, schools and home characteristics  are right there for them.  In an astounding number of cases buyers contact a broker about a property AFTER they have done most of the leg work.  Well, if consumers are doing a lot of the work, shouldn't they be compensated?  I think so although most brokers do not allow their agents to rebate saying it's a sign of weakness.  I think it's a sign of consumerism!  You know the old saying "Time is Money" -  so if a buyer is saving me time it's only right that they be paid.  That's consumerism!

Now, I don't just gift away 20% of my compensation.  Buyers have to EARN it. and here is how and why they can IF THEY CHOOSE.

1.)  They must be pre-approved by a reputable lender BEFORE looking at houses

2.)  They must come into the office for a consultation on the process.   Most buyers have no idea what is happening as they view houses or write out an earnest money deposit and are unaware of the many protections a sales contract gives them, the mortgage process, etc.  At the end of this consultation they have a tremendous understanding of the how and why of what they are doing.  And they feel much more comfortable and confidant.

3.)  They must  register for the Help-U-Sell "First to Know" program which alerts them as homes come on the market or are reduced into their range.  Buyers LOVE this.

4.)  They must have some knowledge of the area and know what town they desire, what type of home and we also develop a "Must Have, Would Like to Have, and Can Not Have" list.  This is usually developed during the office consultation and winds up saving everyone a lot of time.

5.)  They must drive by the property before a showing.  Many houses look great in pictures but what about the neighborhood.  Are the houses around it well kept?  Is there a fire house or water tower near it.  Is it near a busy road.  These may not bother many buyers but if it does let's know before viewing it.

6.)  Two days before the closing they must give me a written or video testimonial.  Self explanatory.

Most buyers opt in since the above "tasks" are easy and enjoyable.  So now they receive anywhere from about $700 to a couple of thousand dollars at the closing.  And they can use this "found money" for anything from furniture, carpets, appliances, patio sets or WHAT EVER THEIR HEARTS DESIRE.

The vast majority of agencies, especially large ones, will not offer this important benefit but some small brokers do and can.  For the agent, there is less time wasted and more spent with their families and other activities.  And for the broker, it's simple math.  20% to the buyer is much more efficient than paying 50% - 70% and more to agents.  That's Help-U-Sell.  Smaller, more efficient operations while netting more per transaction.  Win - Win!     Win - Win!     Win - Win

TO MLS OR NOT TO MLS

There is a little controversy right now about the concept of a ‘Pocket Listing.’  There have been a number of recent news and opinion pieces, mostly from Realtor groups, condemning the practice of keeping a salable listing out of MLS. (Multiple Listing Service)   Before I tell you what I think, let’s examine the Realtor point-of-view.

Since the advent of the MLS, the residential real estate business has operated on a cooperative basis.  Because most MLSs require that every home listed by a member broker be offered for sale through the MLS (unless the sellers signs an op-out waiver), every Realtor has an opportunity to sell any property listed with a competitor and earn a portion of the commission.

This is marketed as being in the best interest of the seller because it maximizes the opportunities for exposure of the home, getting it in front of more and more potential buyers through their individual agents. And after all, whether another Realtor comes in with the buyer or the listing agent finds the buyer him or herself, the cost to the seller will be the same; it won’t cost any more.

And that’s where the problem lies.

In general, when a seller lists with an ordinary broker, s/he agrees to pay a percentage based commission.  The actual percent varies, but will often be in the 5% – 7% range.  Consider something right in the middle, say, 6% on a $500,000 home. That’s a $30,000 commission!  Huge, right!?  But one of the reasons it is so high is the listing office has to be prepared for the likely event that an outside broker and agent will bring the buyer – and they’ll have to be paid half of that commission.  Of course, if there is no outside broker, if the listing brokers finds the buyer his or herself, the seller still pays $30,000 because . . . well because that’s just the way it’s done!

At Help-U-Sell Bay Beach Realty, we don’t charge a percentage based commission, we charge a Low Set Fee.  AND we unbundle commissions.  If there is no outside broker involved, you don’t pay one.  Now that’s a real benefit to a seller, one you can put a dollar sign on!

There are situations – locations and marketplaces – where we recommend most sellers go into the MLS.  These are the situations where we need all the exposure we can get.  But in a good location, with a properly priced house, sometimes it makes sense to stay out of the MLS – especially if that means saving the seller a lot of money.

Right now, in various locations around Central Jersey homes are selling in 60 days or less and sellers are getting 99% of their Listing Price in a Sale.  Clearly demand is high.  In a market like this it might make sense to market the home for a time – say, 30 – 45 days without the MLS, without offering it for sale through outside brokers.  If a buyer can be found without the MLS, the seller of the $500,000 home mentioned above would a TON!

At Help-U-Sell Bay Beach Realty, we are about two things:

• Getting your house sold for top dollar
• Saving you the most money in commission expense

We will consult with your at the time of listing and continuously thereafter about how best to market the home, whether the MLS makes sense or not, and how to maximize your savings while selling for the greatest possible price.

Where do brokers advertise and WHY?

Sellers love to see their home advertised because, of course, exposure - along with proper pricing - is how houses are sold.  But modern technology has changed the importance of WHERE a property is promoted. When you get right down to it, the Multiple Listing Service is all the advertising any home needs.  That's because the real estate community - the members of the MLS - ARE the market place and because sellers usually pay the same commission regardless of WHO sells the property.  (But not at Help-U-Sell)

Now once the home is entered into the Multiple Listing Service, the MLS syndicates it out to up to 75 websites like Realtor.com, Trullia, Zillow, etc.  This is automatic by the MLS and NOT by the broker.  And if they property is sold by another broker the listing broker has to split the commission.  Darn!

Even if the listing broker NEVER uses print ads a properly price home will sell.  So why do brokers still use print ads?  There are 4 prominent reasons:

1.)  To keep the seller happy.  As stated above, sellers love to see print ads although they play a minuscule role in the sale.

2.)  To make the phone ring.  When a potential buyer calls in a great contact is made and brokers skillfully train agents on desk duty to tell the buyer about all similar houses.  When advertising a seller's house, the broker is essentially advertising all similar houses.  So that phone ringing is music to their ears.

3.)  To attract listings.  All ads must have the brokers contact information in them so even if an agent pays for the ad themselves, they are still promoting the brokerage.  Brokers LOVE that!

4.)  And the grand daddy of them all ----- TO RECRUIT!   Bringing in new fresh blood is the life line of most real estate offices (other than Help-U-Sell) since over 80% will be gone in a year or two.  (More later.  This will be a whole new post)

So, as mentioned above, print ads do very little for the seller but plenty for the broker.   And guess who pays?  Yup - the seller.  Think about this.  Successful sellers not only pay for their own marketing expenses but for the unsuccessful sellers too.  Kind of like welfare!  We all love welfare, right?

Ok, we do some advertising too - for the same reasons stated above.  But not nearly as much because the Help-U-Sell system is designed to maximize efficiency and pass the savings on to the seller.  That's what we deliver -  EFFICIENCY, EFFECTIVENESS and VALUE!!

What is full service in real estate? Do you get what you pay for?

Consumers intuitively know what ‘Full Service’ in real estate means:

• Expertise/Consultation (preparation for sale, pricing, planning, staging)
• Marketing (which might include MLS, Internet, Open Houses, advertising, signs, flyers, etc)
• Representation/Negotiation (weighing offers, avoiding mistakes, anticipating next steps)
• Transaction Processing/Problem Resolution (making sure everything is done properly, handling problems as they arise)

The problem is that almost everyone in the business – traditional percentage-based brokers, discount brokers, flat fee brokers, fee for service brokers and so on – claims to do all of those things!  The only brokers who might admit to NOT doing some of it would be self-described ‘Limited Service’ brokers or ‘MLS Only’ brokers.

With so many different kinds of brokers laying claim to  ’Full Service,’ the term becomes  meaningless . . . except that consumers don’t realize this.

In the muddled mess of real estate company marketing, they have come to believe that  ’Full Service’ must also mean ‘Full Commission.’

>>>(and therefore, less than full commission means less than full service)<<<

Of course, nothing could be further from the truth.

If your less-than-full-commission offering is based on a better, more efficient business model that enables you to be profitable while charging people LESS . . . then the debate is not about the level of service, it’s about how much the consumer wants to pay to sell a house.   And here’s a news flash:  s/he wants to pay as little as possible to get the job done quickly, efficiently and effectively.

At Help-U-Sell Bay Beach Realty, we charge LESS because our business model is more efficient.  And even though we charge LESS, we make MORE than our percentage based competitors because of this efficiency.

That can be a frightening proposition to ordinary brokers stuck in the old percentage based commission prison.

On the defensive, the ordinary broker sometimes spreads false rumors about us.   When Suzy Sixpence from Acme Realty says

Help-U-Sell?  Oh, they’re not Full Service . . . I know they’ll say they are, but they really don’t do anything for their sellers except put the sign in the yard.  Sometimes they won’t even put you in the MLS – and of course, without that, you’re not even on the market!  We all know you get what you pay for, and that’s really true when it comes to Help-U-Sell and the other discounters,

When she says that, she sometimes gets a head nodding Amen from her audience. But they are not nodding because what she’s saying about Help-U-Sell is true. They are nodding because they know there is a difference between Nordstrom and Wallmart . . . and she successfully uses that knowledge to twist perception in the real estate arena.  She reinforces the irrational belief that Full Service means Full Commission . . . and sometimes it works.

Listen:  we do everything they do, and in fact:  we do more; but we charge LESS because we do business in a more efficient, modern way.  Don’t be derailed by the hype – contact us directly to find out what we do, what we charge and how much you could save.

Charles Schwab and Steve Jobs created the "Time of Change". Real Estate, get ready - here it comes!

We often look at the history of the securities business in the last 15 years and draw parallels to real estate.  Remember?  We used to have to contact a broker to trade a stock and we paid a percentage based commission for the privilege.  Stock trading was mysterious, complicated, beyond the grasp of most people and the commissions were, well, just the cost of entry.

Then along came Charles Schwab with $15 flat fee trades.  Consumers loved it and the industry took note.  The forward thinkers not only shifted to the new model, they enhanced it by putting powerful analytic information into consumers’ hands on the Internet.

Sound like the real estate business?  You bet.

The same kind of change happened in the Music business.  Remember when we used to go to the music store to buy vinyl LP records, and then CDs?  That’s how music was distributed.  The whole industry was built around the idea of making and marketing these plastic objects called ‘records.’

But then, technology made it possible for people to take the records, digitize them and then share them (often illegally) over the Internet.  The industry reacted not by looking forward at how they might capitalize on this,  but by looking to the courts, suing the most prolific pirates.  Meanwhile, Steve Jobs – a music industry outsider – quietly invented the Ipod – nothing more than a solid state drive with a simple user interface – and the ITunes store for making digital music accessible to consumers.  For 99 cents you could buy a song . . . and, today, that’s what we do.

Just as in real estate, we had a music industry fighting to preserve the status quo . . . and losing; because you can never preserve the status quo.  It is impossible. In both cases we have industries struggling to keep information out of the consumer’s hands . . . and losing, because you can’t stop the consumer.

Want another example?  How about the Travel industry.  Not too many years  ago we used to call a travel agent to book a plane trip or a vacation.  They had all the information:  schedules and fares and so on; and they earned a nice commission for helping us navigate this mysterious process.

How many travel agents do you know today?  Really:  they have become largely extinct!  And how do we book travel today?  We go to the Internet where all the information is housed and make our decisions for ourselves.  Unfortunately, the pricing model for travel has not changed significantly . . . which makes me wonder:  who is getting that commission today?

And here we have real estate:  an industry that justified its percentage based commissions for decades largely by hoarding information.  Then along came the founder of Help-U-Sell, Don Taylor (and by the way, he came along a good ten years before Charles Schwab had his epiphany).  He saw a way to do the real estate business not for a nonsensical percentage based commission, but for a Low Set Fee.  He saw all of this hoarding going on and decided that Information Without Obligation would be one of his new company’s core values.  The maturation of the Internet twenty years later put that value on steroids . . .

And how did the Industry react?  It ran in terror for the hills, dug foxholes, locked up the valuables (the information), put its fingers in its ears and refused to hear what consumers were saying.

Even today, with a real estate market undergoing upheaval, with change swooping down around us like a Tsunami, how many of the big national brands are talking about their pricing model?  Um . . . none.

Even today, when consumers can (with the click of a mouse) get all the information REALTORS used to hoard, how many are talking about how we can use that fact to streamline the process and make the experience better for the home buyers and sellers?  Um . . . none.

At Help-U-Sell Bay Beach Realty, we embrace the new way to buy and sell real estate.  We want our buyers and sellers to be as involved in the process as they want to be and give them all the tools and information they could possibly need to have a stellar experience.  Our approach to the business is not mysterious and it makes sense . . . just as our Set Fee does.  Think of us as the Charles Schwab/ITunes/Orbitz of real estate, and then call us when it’s time to buy or sell.  609-242-0506

WHERE DID ALL THESE PEOPLE COME FROM?

Very few people realize how many agents are involved in the sale of their home.  Here's a quick accounting -- probably the only one you'll see.

In most transactions there are 3 or 4.  The listing agent and maybe a selling agent in the same office and their broker.  OR  The listing agent and broker plus the selling agent and broker.  All agents MUST work under a broker.

Now, a new twist in the real estate industry is the concept of teams.  The broker pays the team leader more money and the team leader recruits agents under them.  Sort of like a manager.  Teams are a waste of money but they're getting popular so now we could be up to 6 fingers in the pot.

But wait, how about referral agents?  See, in addition to the 1 million +- members of the National Association of Realtors, there are untold numbers of referral agents.  They do so little work that they don't want to or can't afford to pay the annual dues so many brokers set up a separate company which is NOT a member of the Boards of Realtors and ware house these agents to refer business.  Getting crowded isn't it?

And believe it or not, at least 2 national firms pay recruiting bonuses to agent who bring in other agents anywhere in the country.  So part of your hard earned equity could be going to someone far away who will not be involved the your transaction and never see your house!  Ouch!

It's unlikely all of these people would be involved in any sale but the average is about 5.  At Help-U-Sell it can be a little as 1-3 - and we pass the savings on to our Sellers.  (Hey Sellers, we love you!)

So if you plan on selling a home in Toms River, Beachwood, Bayville, Forked River or Lanoka Harbor in Lacey, give us a call.  We ever service Waretown, Barnegat, Manahawkin and Little Egg Harbor.  Our Common Sense approach is guaranteed to save you lots of money for the same services.

609-242-0506.

Real Estate Sales Commissions Revisited

Most traditional real estate brokers – what I like to call ‘ordinary’ brokers – charge a percentage of a property’s sale price as commission.  It’s been that way for  . . . well, for as long as anyone can remember.  It’s what we do because . . . it’s just what we do.  To question it would be like questioning why we eat three meals a day or why we go to bed at night.  So, while percentage based commissions irritate real estate consumers to no end, they are rarely challenged.   Here at the Set Fee Blog, we challenge them every day.  We believe the future of real estate will be better for consumers who will pay a logical (lower) set fee to market their property.

Let’s take a breath here in the Spring of 2013 to, once again, chip away at that tired old percentage based paradigm.  Let’s take a look at why percentage based real estate commissions make no sense.*

REASON ONE:  Percentage based commissions are arbitrary

In my examples I am using 5%.  But why?  What does 5% of the sale price have to do with what it takes to get the property sold?  What does it have to do with effective representation of the seller’s interest and the effectiveness of processing the sale?  Nothing.  It’s just a number I pulled out of the air, remember?  And that’s how ordinary brokers set their commission rates:  they usually just pull them out of air.  There is no connection between the fee charged and the level of effort and resources it will take to sell the property.  

From an ordinary broker’s perspective, the arbitrary percentage based commission is full of possibilities!  Because it is a percent of the sale price, the amount of dollars collected in commission goes up as more and more expensive property sells!  A typical strategy for an ordinary broker who wants to improve his/her bottom line is to target ever more expensive property . . . because 5% of $500,000 is a heck of a lot more than 5% of $300,000 . . . and, honestly?  It usually takes no more time, effort, energy ormoney to market a $500,000 home than a $300,000 home. Yea!  Let’s hear it for arbitrary commission rates!

REASON TWO:  Percentage based commissions are inequitable

Let’s assume you want to sell your $300,000 house.  It’s a nice big 4 bedroom with 2,200 square feet of living space.  You decide to list with a fictitious company, Hypothetical Realty, and agree to pay their 5% commission when the property sells.  That’s $15,000 (Gulp!).

 (Wait a minute . . . I’m having trouble catching my breath . . . I’m thinking about YOU in your $300,000 house.  If you are a typical $300,000 house homeowner, you might earn in the neighborhood of $80,000 a year.  That means YOU, the owner of this house has to work about 2 1/2 months to pay your real estate commission!  Really:  take your paychecks for January, February and half of March and give them to your real estate broker because that’s what it’s going to cost to sell your house! )

Now, when your neighbor sees the For Sale sign in your yard, he starts to thinking . . . ‘maybe this is a good time for ME to sell.’  So he calls up Hypothetical Realty, has them over for a chat and agrees to pay their 5% commission, too.  But his house is smaller: it’s just 3 bedrooms and 1,800 square feet.  Price: $240,000.  If it sells for full price, the commission will be $12,000.

Wait a minute!  You’re paying $15,000 for the same service delivered by the same company that your neighbor is paying just $12,000 for!?! WHY?? Where is the logic in that?? Are you paying $3,000 more because it will take that much more advertising to get the job done? (Hardly)  Are you paying $3,000 more for a better For Sale sign??  Oh, I know: you’re paying $3,000 more because your agent is going to work $3,000 harder, right?  WRONG!  There is absolutely no reason why you’re paying $3,000 more than your neighbor other than this:  you’ve been conditioned from the moment you had your first real estate transaction to accept without question the notion that real estate commissions should be a percentage of the sale price.

Usually it takes no more time, energy effort or money to sell a $300,000 house than a $250,000 house in the same neighborhood.  So why aren’t they paying the same thing?  I really have no explanation.  I think, next time you talk with Hypothetical Realty, you might want to ask them.

REASON THREE:  Percentage based commissions are inflexible

Ok.  You listed with Hypothetical, remember?  They are selling your $300,000 house and charging 5%.  The reason the fee is so high is that in all likelihood there will be TWO real estate companies involved in the transaction – yours (the listing company), and a different company who comes in with the buyer. Both companies will need to be paid.  And, of course, each of those companies will be represented by an agent who needs to be paid, too.   So that 5% you agreed to pay is not just one commission, it’s four:  one for the listing company, one for the listing agent, one for the selling company and one for the selling agent.  Ok, maybe there is some logic in this lofty commission stuff after all! There are a lot of people who have to get paid!

But wait:  what if your listing company finds the buyer?  What if there is no outside broker involved?  Do you still have to pay all four commissions?  Yep.  That’s what you agreed to when you signed the listing agreement.  So what does the listing broker do with the extra cash he got to keep?  Well in other industries it’s called overage or breakage . . . and it’s one of the keys to pocketability . . oops, I mean profitability.

Or, how about this sad tale: you list your home with Hypothetical on Friday and on Monday you meet the new person transferring into your company from out of state.  They hear about your house, fall in love with it and want to buy it.  You call up your agent to write it up.  Now YOU found the buyer, right?  Are you still going to have to pay all four commissions?  Yep.  That’s what you agreed to when you signed the listing agreement.

You see, there is no connection between what it takes to make the sale and what you’ll pay.  It is a completely inflexible, one-size-fits-all system that, I’m sure you agree, makes no sense.

I could go on, but I think three reasons why percentage real estate commissions make no sense is enough.  It’s important that you know that it doesn’t have to be this way.  There are alternatives out there, though they can be hard to find.  One I know and believe in is Help-U-Sell.  They charge a logical Set Fee to sell your house.  It’s just a wild guess on my part, but that $300,000 house?  The one Hypothetical was going to charge 5% or $15,000 to sell?  Help-U-Sell Theoretical Realty (a fictitious company operating in the same fictitious neighborhood) might charge something like $3,950 to sell it.  Oh, and they’d charge your neighbor with the $250,000 house the same $3,950.

Now I want to be completely clear about this.  That $3,950 is this particular Help-U-Sell office’s Set Fee.  It covers the consultation and advice you’ll be getting, the marketing of the home, the negotiation, representation and transaction processing you’d expect from any Full Service real estate broker.  

What it does not include is any commission for an outside broker or agent.  You don’t have to offer it for sale through outside agents, and in some hot markets, that might be advisable.  I mean if you can sell without paying extra people, why do it, right?  However, most sellers opt to go into the local MLS which means agreeing to pay outside brokers and agents a fee if they bring in the buyer.  So you’ll be adding their fee to your Help-U-Sell $3,950 in the event that’s how the sale is made.  How much would it be?  For your $300,000 house, you might offer between $6,000 and $9,000 to compete for an outside broker or agent’s attention, but the amount you offer is entirely up to you.  

And here’s the best part:  suppose you do want to offer your home for sale through outside brokers as well, you go into the MLS and you offer to pay an additional, say, $7,500 to an outside broker should they find the buyer . . . but then, you go to your office and, as in the example above, you find your own buyer.  What do you pay?  Just the Help-U-Sell Set Fee, $3,950.  You see, with Help-U-Sell, you pay a fee based on how your home actually sells – with or without outside broker help – not based on an arbitrary percentage based commission that was intended to compensate four different entities.

*In this Blog post, I will be using examples of percentage based commissions.  For convenience sake, I’m going to use 5% as the commission rate.  It is a number I plucked from air and is in fact a rather unusual number in today’s real estate universe:  most charge more.  It is important to remember that real estate commissions, whether percentage based or set fee, are fully negotiable between the broker and the consumer.  There is no ‘going rate,’ and each situation is (theoretically) handled differently.  Brokers set commission rates for their individual offices and if rates are negotiated, they are done so only with the broker’s approval.  Price fixing occurs when two or more brokers get together and agree to charge the same thing.  That is a highly illegal activity.  At Help-U-Sell, different offices charge different set fees for a very logical reason:  the cost of carrying a listing varies from location to location as does the number of days it takes to get a listing sold.  

Grants, loans and rebates for Sandy losses

I attended at seminar this morning with my wife, Debbie,  which was held in the Mancini Room of the Ocean County Public Library in Toms River.   It was hosted by the Ocean County Board of Realtors and sponsored by the NJ Board of Public Utilities and New Jersey Natural Gas.

There are residential and commercial programs available but most have deadlines of June 30, 2013 which  MAY be extended beyond if the new budgets allow.  Without delay, go to NJCleanEnergy.com/Sandy and.NJNG.com for further details.

Reposted with permission of James Dingman.

What Percentage Do Real Estate Agents Charge

By James Dingman on February 16, 2013

I check my stats and other metrics for The Set Fee Blog fairly regularly. It helps me to know what’s drawing visitors and what’s not. It’s also helpful to see what search strings people are using to find me on the web.
Today, I had the following as a search string:


“What Percentage Do Real Estate Agents Charge?”
Ok, so it’s not that unusual. In fact, I’ve seen it in the results for this blog before. But today it just jarred me:


What a sad, stupid and unfortunate question!
Seventy plus years of REALTOR double-talk has trained the public to expect to pay a percentage of the sale price of their house to an agent when it sells . . . and that makes no sense whatsoever.
What does a percentage of you home’s value have to do with getting it sold? Nothing!
Think about it:
Here you are in your $350,000 house. Thankfully, you are not upside down. You have roughly $60,000 in equity. So you decide to sell, and list with ABC Realty**, who charges you (and every seller with whom they work) 6%*. When your house sells (for full price), that’s a commission of $21,000!
I’ll give you a moment to catch your breath . . . before I point out that that may be 6% of the sales price, but it’s 35% of your equity!
Meanwhile, your neighbor down the street also wants to sell, but his home is smaller. It’s only worth $250,000. He also lists with ABC and agrees to pay their 6% Commission. When the house sells for full price, the homeowner is going to pay $15,000 — still high, but not nearly as high as your $21,000 commission.
Now, here’s the question of the day: What did YOU get for the extra $6,000 you paid to sell your house through ABC?
More Advertising?
More Open Houses?
A better Sign?
Oh, maybe your agent worked $6,000 harder! Yeah, right.
What you got for the extra $6,000 you paid is this:

Absolutely Nothing
In almost every case it takes no more time, effort, energy, money or marketing to sell a properly priced $350,000 house than it does a properly priced $250,000 house. There are some situations in some areas where a market niche, say, luxury homes, might take a little more time and might require additional or specialized marketing. But these situations are rare . . . and $6,000 extra dollars to sell your $350,000 house? That’s absurd.
It makes no sense today, made no sense yesterday, and will never make any sense at all.
Come on: you don’t pay your dentist a percentage of your net worth when you have a tooth filled, do you? Of course not! There’s no relationship between the two things! Just as there is no relationship between the percentage based commission you are paying your real estate firm and the effort it will take to market your home and process the sale.
Smart Brokers – by the way, ‘Smart’ is a synonym for ‘Help-U-Sell’- Smart Brokers charge a set fee. Everyone pretty much pays the same thing no matter what the sale price is. It’s logical. The Broker works very hard to determine his or her hard costs of carrying a listing, then adds a reasonable profit to it, and . . . that’s it: the Set Fee the office charges everyone.
Here’s a little bit of scripting I actually heard in a REALTOR seminar some years ago. It’s what an agent is supposed to say when a potential seller is shocked by the high percentage based commission.

“I know it seems like a lot, Mr. & Mrs. Seller, but think about it for a moment. We’re getting 6%, yes, that’s true; but YOU’RE getting 94%! I think you’ll agree our commission is actually a bargain!”
I hope next time you need to sell, you’ll do the right thing and call a Help-U-Sell set fee broker. You’ll save a bundle (the set fee is usually thousands of dollars less than whatever percentage based commission you’re being quoted). And you’ll have the satisfaction of knowing that, finally, for the first time in your real estate life, you haven’t been taken to the cleaners!
*Commissions, whether set fee or percentage based, are always negotiable. They are not set by law or REALTOR rule. They are set individually by office Brokers. Price fixing occurs when different Brokers get together and agree to charge the same thing. That’s highly illegal. Different Help-U-Sell offices charge different Set Fees, because the carrying costs of marketing a listing vary from market to market, as do the number of days it takes a properly priced listing to sell.
**The “ÄBC Realty” referred to in this blog is fictitious and is used only for illustrative purposes. Any resemblance between it and any other “ABC Realty”, is purely coincidental.

Don't let mold get you twice.

I was at a function at the Ocean County Board of Realtors yesterday and an interesting statement was made by an insurance agent and pretty much confirmed by a mortgage rep.

Lots of homeowners who suffered damage from Storm Sandy quickly replaced their sheet rock and insulation but did NOT do a mold test and get a certification when the work was done.  Here's the warning -- years into the future when the owners go to sell, the insurance carrier and new mortgage company MAY REQUIRE that a mold certification be part of the loan and insurance package.  If the certification was not completed at the time of the repair, the walls MAY have to be re-opened for certification.

Here's a classic case of "Better Safe than Sorry" -- do it now!

Storm Sandy damage will take years to recover from.

In the past two weeks my wife Debbie and I drove through Long Beach Island and Holgate then from Seaside Heights up to Mantoloking and Bay Head to view the damage.  Frankly, I was knocked on my butt.  We waited a few months to stay out of the way of the cleanup and utility crews but 110 days after the storm shows the extend of the damage and the incredible amount of time and money it will take to try to fix.  Notice I didn't say recover because perhaps some people never will.

Dozens of ocean front homes were broken in half and many more essentially destroyed although still standing.  Some of the small bungalows in Ortley Beach and Lavalette were knocked off their foundations and others just washed away.  The fight with insurance companies is just starting and will go on for months if not a year and when the dust settles, the uninsured losses will be staggering.

Good Luck Point in Bayville is as bad as the Barnegat Beach Island ocean fronts even though it is bayfront.

The days of fairly inexpensive flood insurance are gone and many people will have to raise their houses several feet.  Sadly, if they can't afford to and don't qualify for any grants they will be forced to sell....at a discount.

It will be interesting to look back 5 years from now.

The Mayor is on the line.

Can you imagine sitting home one evening nice and comfortable watching TV when the phone rings.

"Hello, this is the Mayor calling.  I just wanted to let you know that we'll be hiring about triple the people needed to run the town from now on.  They won't be very productive and your taxes will more than double.  But these are really nice people and they're friends of mine...so be a sport and go along with it, OK."

Would you say Yes?

Probably not.  But what I just presented was a snapshot of the real estate business.  There are more than a million real estate agents in the United States but a need for only about 300,000.  The rest are unproductive hangers on that brokers hire to bring in a few deals a year at most (and the productive agents wind up losing business.) The worst thing is that it is supported by a bloated commission system based on percentages - where sellers pay more and more for basically the same services as the value of their house goes up.  NUTS!

Would you tell the Mayor to raise your taxes to pay for unnecessary workers - I doubt it.  But when your agent asks you to pay percentage commissions that's exactly what they are doing.  Don't be fooled.  Be a wise consumer.  STOP PAYING PERCENTAGE BASED COMMISSIONS!!

Brokers are not Loyal to their Loyal Agents.

The last few years, 2008 - 2012, were more than challenging to most real estate agents.  The industry went through the toughest period in 70 years.  Agents that survived it worked harder and spent more on marketing in their brokers name just to stay afloat.  And how were they rewarded?  They weren't!  Instead of brokers holding a meeting and saying "Hey folks, the worst is over and we'll finally see a good increase in business.  You worked really hard in the last few years and to reward you I'm not bringing on any new people so that you can enjoy the big upturn.  It's only fair since you were so loyal  and worked so hard."

NOT!

Brokers are slapping their long time producers in the face, as they always do, by keeping that "Now Interviewing" banner waiving out front.  After painful years of hard work there is no reward.  This industry has long reminded me of the old Roman Coliseum  where the broker (Emperor) sits on his or her perch and brings in more and more agents (the Gladiators) to let everyone, even the loyalist, fight for survival.

Traditional real estate is an awful way of life.  Open your mind and see how it's different at Help-U-Sell.

Traditional Brokers are Getting Squeezed

It isn't easy being a traditional broker these days.  The onset of the 100% concept as seen by ReMax and Realty Executives presents many brokers with a tough choice.  They either have to watch their heavy producers walk out the door or start paying much higher commission rates to them.  Back in the day when brokerage income was split evenly there was some breathing room but not any more with payouts averaging abut 70%.  A few months ago a gentleman I have known since he was about 5 years old became licensed and came in for an interview.  Things went well and we made an appointment for a 2nd interview 3 days later.  When he came back, he said he received a lot of mail and made a few calls and that the Century 21 office down the street would start him at 65%.  The ink was barely dry on his license and someone was offering him 65%.  Absolutely Insane!!  When will brokers gather the courage to take their businesses back?  Talk about the inmates running the asylum.