Posts Tagged ‘home buying’

Sign Proof“So what will it cost us to secure your services?”  One of the top questions that I receive.  The answer may vary depending on the services you request.  For the purposes of this 3 part series, I will let you in on Renter’s Agent, Buyer’s Agent, and Seller’s Agent pay.  According to the 2013 National Association of Realtors Member Profile, “In 2012, the typical agent had 12 residential transaction sides – up from the previous year when the typical agent had 10 transaction sides.”  Traditionally, the real estate industry is completely commission based.  Most of the time, a Realtor works under the supervision of a broker unless they are a broker themselves.  In that case the broker may have their own company or work with a large, well-known company like Keller Williams for example.  There is also the option for a Realtor to work on a team within a larger company.  All of these folks require payment.  So realistically, on one real estate transaction, there is the potential for the commission to be split 6 different ways before it is all said and done.  Let’s take a look at the Seller’s Agent…

The Seller’s Agent.  In the very beginning, the commission percentage for the whole transaction is agreed upon between the seller and the selling agent when the listing agreement is completed.  Generally, the selling agent agrees to split that commission with the buyer’s agent, and that amount is noted in the listing agreement, as well as on the listing that is put on the Multiple Listing Service (MLS).  The listing agreement also details the length of time that the agent will represent the seller, and any other pertinent information like bonuses to the Buyer’s Agent, etc.  The listing agent is in a unique position.  The idea is to get the home in great condition and priced right from day one.  However, despite the agent’s best efforts, sometimes the house doesn’t sell right away.  If the listing agreement expires, and the seller decides not to continue listing with the same agent, that agent may never receive any form of compensation for their time and effort towards marketing the home.

But they put a sign in the yard, place the listing on the MLS and then sit back and wait to get paid, right?  Some agents do.  That’s why I am hoping that you have done your research and chosen an agent who is willing to go the extra mile… like me!  Once you crunch the numbers, it will look like a LOT of money that you are paying to be represented.  Back to the “sign in the yard” question.  Everything (almost) is negotiable in real estate, so it is important to understand what comes with that commission percentage.  The agent may provide a professionally recorded video tour, a home inspection, color flyers, your home may be featured on their website, a lockbox for easy access, coordinated showings and feedback, open houses and all different types of advertising.  Or they might not include any of those things.

So how is a Seller’s Agent paid?  Once a contract is accepted, financing is arranged, and the transaction closes, the seller’s agent gets paid.  The realtor commission agreed upon in the listing agreement is split between the Seller’s Agent and the Buyer’s Agent.  Then, as I spoke of above, this is split with the agent’s broker, and may even be split with the agent’s team if they are on one.

Here is an example:

The price of the home is $100,000.  The commission is 6%; 3% to the Seller’s Agent, and 3% to the Buyer’s Agent.  The brokerage split is 70/30.  The royalties to the company are 5%.  And then the split to the team is 40%.  The paychecks may look like this;  $900 to the brokerage, $150 to the company, and $780 to the team.  That potentially leaves $1170 to the Seller’s Agent before taxes.

Agent John Doe said that he will only charge me 4% commission, so I’m going to go with him.  I’m sure you understand saving a few bucks, don’t you?  I do understand the initial “let me save as much money as I can” feeling.  But if you step back and look at the bigger picture, taking that 4% could cost you more in the long run.  Considering that the commission is split between the Buyer’s Agent and Seller’s Agent like we talked about above, is the agent likely to split the commission equally down the middle?  Probably not!  The reason behind this is because the Buyer’s Agent may be accustomed to receiving a pretty consistent percentage on the sales that they help produce.  We’ll say 3%.  If the 4% is split down the middle, that means the Buyer’s Agent only gets 2% when on most other homes they may get 3%.  That may mean the difference in showing another home (or many other homes) over yours.  So, say the Seller’s Agent agrees to give the Buyer’s Agent the 3%, but there is only 4% to work with.  That leaves the Seller’s Agent 1%.  Let’s see what that looks like in numbers…

The price of the home is $100,000.  The commission is 4%; 1% to the Seller’s Agent, and 3% to the Buyer’s Agent.  The brokerage split is 70/30.  The royalties to the company are 5%.  And then the split to the team is 40%.  The paychecks may look like this;  $300 to the brokerage, $50 to the company, and $260 to the team.  That potentially leaves $390 to the Buyer’s Agent before taxes.

Now, do you think a listing agent is going to extensively market your home, do open houses every weekend like you want them to do, and contribute ample time and money to your home for $390?  If so, they won’t be in the business for long because they won’t be able to put food on their table.  It is more likely that this will be the agent who puts a sign in your yard, places the listing on the MLS, and sits back waiting to get paid.

What if we do a For Sale By Owner instead?  Click the chart to read over statistics provided by the National Association of Realtors, and enough said:  FSBO Stats

Seller’s Agent Expenses. So dang, those agents make a lot of money, right?  Hold your horses!  On top of our split, we have all of these additional expenses and then some:

  • Various taxes
  • Office fees
  • Office supplies
  • Realtracs subscriber fees
  • Advertising (signs, websites, business cards, etc)
  • Clarksville Assocation of Realtors dues
  • Tennessee Association of Realtors dues
  • National Association of Realtors dues
  • Dues for other professional organizations we may belong to
  • Listing services (virtual tours, staging, professional pictures, home inspections, etc)
  • Electronics (computers, cameras, etc)
  • Phone bills
  • Vehicle maintenance
  • And the worst of all… GAS (sometimes multiple times per week)!

Does that break it down for you?  Questions?  Concerns?

Be sure to read, Realtor Pay Exposed (Part 1 of 3): The Renter’s Agent and Realtor Pay Exposed (Part 2 of 3): The Buyer’s Agent.

If you have questions or need real estate assistance in the Clarksville, Tennessee or Fort Campbell, Kentucky area or know anyone who does, call me today at (931) 436-6765 or submit your information below.

© Ariel Anderson and https://buyorsellclarksvilletennesseehomes.wordpress.com, 2014.  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Ariel Anderson and https://buyorsellclarksvilletennesseehomes.wordpress.com with appropriate and specific direction to the original content.

real-estate-dual-agency-buyers-and-sellers“So what will it cost us to secure your services?”  One of the top questions that I receive.  The answer may vary depending on the services you request.  For the purposes of this 3 part series, I will let you in on Renter’s Agent, Buyer’s Agent, and Seller’s Agent pay.  According to the 2013 National Association of Realtors Member Profile, “In 2012, the typical agent had 12 residential transaction sides – up from the previous year when the typical agent had 10 transaction sides.”  Traditionally, the real estate industry is completely commission based.  Most of the time, a Realtor works under the supervision of a broker unless they are a broker themselves.  In that case the broker may have their own company or work with a large, well known company like Keller Williams for example.  There is also the option for a Realtor to work on a team within a larger company.  All of these folks require payment.  So realistically, on one real estate transaction, there is the potential for the commission to be split 6 different ways before it is all said and done.  Let’s take a look at the Buyer’s Agent…

The Buyer’s Agent.  This agent does not cost the buyer a dime in this area.  As I talk about in 6 Reasons NOT to Call the Realtor on the Sign, my services to you as a Buyer Representative are practically free.  The commission percentage is agreed upon between the seller and the selling agent.  Generally, the selling agent will agree to split that commission with the buying agent, so you my friend, are off the hook!  All of my expert assistance, with no money down!

There will be a Buyer Representation Agreement.  A Buyer Representation Agreement details my duties to you as your agent, yours to me as a buyer, and that we mutually agree to work with each other.  I agree to work as your representative, and you agree to be represented by me.  It also specifies things like the length of time that the contract is good for, what type of home you are searching for, and the sources used for the search.  According to the Tennessee Association of Realtors® (TAR) Consumer Guide to Agency Law in Tennessee, “Once you have signed a Buyer Representation Agreement, this contract obligates your agent to be your loyal advocate and to promote your best interests above all others in the negotiation and closing of a successful purchase.”

This part is important to us Realtors, and I think you will be able to see why.  I’ve only had it happen once, but it still stings.  A potential buyer contacted me months before their anticipated arrival.  There were some specifics that they required in a home.  I searched, and searched, sifting through listing after listing (hundreds!) to find the right ones to show them.  Hours of my time before they ever arrived.  I answered their questions, blocked my time for them in preparation for their arrival, and was completely dedicated to easing their transition.  To make a long story short, they didn’t want to sign my Buyer Representation Agreement when they arrived, even though I agreed to write in the special stipulations that I would let them out of it if they so desired.  For three days, I searched for homes, arranged showings, and took them to see houses.  We drove from one end of Clarksville to another, and I held other clients off out of loyalty to the time I had blocked for them.  On the fourth day, after arranging another evening of house hunting, they stood me up.  Property transactions are noted in our Multiple Listing Service (MLS), and are ultimately public information.  It wasn’t long before I discovered that they had bought the very first home that I showed them.  Hours, and hours of my time wasted.

But moving forward, how is a Buyer’s Agent paid?  We find the home you love, and go under contract.  On the MLS sheet, the compensation amount is listed.  This is a percentage that is split between the Seller’s Agent and the Buyer’s Agent.  Then, as I spoke of above, this is split with the agent’s broker, and may even be split with the agent’s team if they are on one.

Here is an example:

The price of the home is $100,000.  The commission is 6%; 3% to the Seller’s Agent, and 3% to the Buyer’s Agent.  The brokerage split is 70/30.  The royalties to the company are 5%.  And then the split to the team is 40%.  The paychecks may look like this;  $900 to the brokerage, $150 to the company, and $780 to the team.  That potentially leaves $1170 to the Buyer’s Agent before taxes.

Buyer’s Agent Expenses. So dang, those agents make a lot of money, right?  Hold your horses!  On top of our split, we have all of these additional expenses and then some:

  • Various taxes
  • Office fees
  • Office supplies
  • Realtracs subscriber fees
  • Advertising (signs, websites, business cards, etc)
  • Clarksville Assocation of Realtors dues
  • Tennessee Association of Realtors dues
  • National Association of Realtors dues
  • Dues for other professional organizations we may belong to
  • Closing gifts to our buyers
  • Electronics (computers, cameras, etc)
  • Phone bills
  • Vehicle maintenance
  • And the worst of all… GAS (sometimes multiple times per week)!

Bonuses.  I will let you in on one last little secret.  Everything in real estate is negotiable.  Sometimes if a particular listing has been on the market for a long time, or if the seller is motivated to get the home sold quickly, they may include a bonus to the Buyer’s Agent.  These bonuses can range from hundreds of dollars to thousands (even tens of thousands) of dollars, and it is not something that you as the buyer are usually aware of.  Though any payment amounts are noted on the final HUD that you will receive before closing.  The seller and listing agent can also agree to pay a higher commission percentage as an incentive to the agent.  Keeping that in mind, if you have an agent who is passionate about the families they help, and not particularly money driven, they may opt to forgo the additional bonus or lower their commission amount to get you the deal that you want.  Not tooting my own horn, but I have done this for my clients.  I have let a few bonuses go to get my buyers the most and there are a few other like-minded agents out there.  Disclosure is the best practice in my opinion, and I do not try to keep those sorts of things concealed.  After all, realtors can offer their opinions, but we cannot make you buy a particular home.

Be sure to read Realtor Pay Exposed (Part 1 of 3): The Renter’s Agent and Realtor Pay Exposed: The Seller’s Agent (Part 3 of 3)

Does that break it down for you?  Questions?  Concerns?

If you have questions or need real estate assistance in the Clarksville, Tennessee or Fort Campbell, Kentucky area or know anyone who does, call me today at (931) 436-6765 or submit your information below.

© Ariel Anderson and https://buyorsellclarksvilletennesseehomes.wordpress.com, 2014.  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Ariel Anderson and https://buyorsellclarksvilletennesseehomes.wordpress.com with appropriate and specific direction to the original content.

Over the years as a military family, we have moved numerous times.  We have rented apartments and duplexes, lived on post, and owned homes.  We have converted our primary homes into rentals, taking us from militaHome-Happy-Home-1-size-3ry homeowners to investors, and we have managed them personally, making us landlords.  I have been the general manager of a large hotel, worked for military housing, and have since become a licensed real estate agent.  So I got to thinking, (watch out!  It can be dangerous when I get to thinking… ha!), based on all of our personal experience, and experience with all the people I have been in contact with over the years, are homeowners happier?  What I found surprising is that there have been some actual studies done and data collected with the same question in mind.

If we go back to a previous blog post of mine, Which Realtor is Right For You?, I speak of Maslow’s Hierarchy of Needs.  The foundation of the pyramid includes physiological requirements like breathing, food, water, sleep and shelter.  The pyramid theorizes that the next level of human needs include bodily safety, health, and the security of property.  Having a place to call home is one of the most important motivators of human behavior.  So why do we decorate our homes for holidays?  Why do we mow our lawns and maintain our landscaping?  Why do we clean and tidy our homes before we have visitors?  Why do we often ask new acquaintances where they are from originally?  It is plausible to think that it is because we identify ourselves with the place that we call home.  Our home is an extension of who we are; an important display of our personality and identity.

In 2013, Fannie Mae conducted a National Housing Survey (click to see the survey results in their entirety).  Renters and homeowners rated their experiences on the following scale:  very positive, somewhat positive, somewhat negative, and very negative.  There was a significant disparity in the results.  71% of homeowners rated their experience as very positive, while only 34% of renters felt the same way.  For renters ages 18-34, 57% would actually prefer owning a home, only 13% prefer renting, and about 30% have a mixed preference.  Interesting!

According to the survey, the top reasons to rent were:

  • Living within a budget (57%)
  • Less stress (52%)
  • Best decision given the current economic climate (50%)

On the other hand, the top reasons given for owning were:

  • Control over living space (84%)
  • Privacy and security (80%)
  • A good place for family and to raise children (78%)
  • Best investment plan (78%)
  • A nicer home (71%)
  • Building wealth (70%)
  • Saving for retirement (69%)
  • Being engaged in the community (64%)

According to the National Association of Realtors Survey of Home Buyers and Sellers, the top motivator for buying a home was simply the desire to own, closely followed by the desire for a larger home, a job related move, change in family situation, and affordability of owning versus renting.

Now we are getting to the good stuff!  Did you know that there was a study on the social benefits of homeownership?  Yeah, me neither until my pondering got the best of me and I found some incredibly interesting data.  As stated in the 2012 Social Benefits of Homeownership and Stable Housing, homeowners move less frequently.  Now, being a military family, I immediately thought to myself, “We don’t really have control over how often we move.”  But yet, we do.  How many military families have you known stationed at one installation for several years who move every time their lease is up or a deployment rolls around?  I can think of a few.  We’ve done it a few times ourselves.  We’ve gone from on post housing, then moved closer to family during a deployment, then back to on post housing again.  Would we have done the same if we had been more invested in our residence?  Likewise I have worked with families who have gone from on post, to rentals off post, and back to post housing again all within a few short months.  The bottom line is, the research shows, homeowners move less frequently, they are more invested in their neighborhoods, and they tend to build more long term friendships.

Additionally, there is the belief that crime rates may be lower in neighborhoods where the residents are predominantly homeowners.  If you think about it, it makes total sense.  Homeowners who may move less frequently, are more invested in their neighborhoods, who have formed longer lasting friendships may be more likely to notice someone who doesn’t belong.  They may be more likely to look out for the homes in the vicinity and report something that doesn’t look right.  They may also communicate more regularly with neighbors and develop formal or informal neighborhood patrols and watches.

Homeowners also tend to give more back to their communities as far as volunteering, church involvement, and through participation in community organizations.  Just a little side note… Have you ever been having a crappy day and then randomly decided to do something nice for someone?  Maybe you paid for the person behind you in line at Starbucks, or told a stranger that you love her outfit.  It makes you feel better, right?!  If we put positivity out into the world, that tends to be what we attract back into our lives.  I had not even begun to think of the effect that owning a home has on parents that might then in turn effect their children.

As I read through the Social Benefits of Homeownership and Stable Housing, I was pretty astounded by the findings.  What typically happens with children when you move frequently?  They tend to change schools more often.  Makes sense, right?  Data has shown that frequent school changes can have negative impacts on children and families.  Because homeowners tend to move less frequently, their children tend to change schools less often as well.  For younger children this has been shown to mean fewer behavioral problems, and higher scores in math and reading.  For older children, the effects can be life-LONG and life-changing.  They tend to have higher graduation rates and they have lower teenage pregnancy rates!  Ultimately the numbers show that if you own your home, your children are more likely to own their homes as well.

So you may be thinking, “well there is no way we could afford to own a home on one income”.  That is a self-limiting belief.  You may be surprised by what you are eligible for.  What may surprise you even more are the benefits of homeownership to low-income families.  The families living at or below the poverty line who became recent homeowners tend to report a higher level of perceived control over their lives which ultimately lead to higher life satisfaction, and higher self-esteem.  Homeownership was directly correlated with higher educational achievements, higher earnings, and lower welfare dependence rates.  Is it all some strange coincidence?  I don’t think so.

The results were not limited to the United States.  Based on findings in the UK by the Office of National Statistics Survey, 80% of folks who owned their homes reported a medium to high level of satisfaction, while 68% of renters reported the same.  Canada reports one of the highest rates of homeownership worldwide with 70% of their citizens being homeowners.  The Canada Mortgage and Housing Corp. (CMHC), worked with Habitat for Humanity on a study that corresponded with the United States’ Social Benefits of Homeownership and Stable Housing study and reported that 86% of the respondents said their lives had improved since owning their homes.  Among many things, they reported improved health, increased happiness with work and school, and 58% said their finances were better.

Healthy Happy HomeNow I do believe the numbers don’t lie, but don’t get upset, I’m not saying their aren’t happy renters too.  Some of us have the ability to make the most of any circumstance that comes our way.  I simply leave you with my ponderings… Is it possible that homeownership can contribute to happiness?

If you have questions or need real estate assistance in the Clarksville, Tennessee or Fort Campbell, Kentucky area or know anyone who does, call me today at (931) 436-6765 or submit your information below.

© Ariel Anderson and https://buyorsellclarksvilletennesseehomes.wordpress.com, 2013.  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Ariel Anderson and https://buyorsellclarksvilletennesseehomes.wordpress.com with appropriate and specific direction to the original content.

October 2013 Nosy Neighbor Newsletter

Everyone has had that nosy neighbor at some point!  This newsletter has been designed to keep you “in the know” as to what is going on in the Clarksville, Tennessee and Fort Campbell, Kentucky area.