Real Estate Commissions - You Get What You Pay For

Real Estate Commissions: You Get What You Pay For

by The KCM Crew on March 7, 2012

Considering a Discount Broker?

Does it makes sense to pay a full commission to your real estate agent in today’s market? Sellers, buyers and even agents are debating what should be charged to assist a consumer in completing a real estate transaction. Forget what the actual amount of the commission is. The bigger question is whether you should pay a ‘full fee’ when hiring a real estate expert to guide you through the complexities of today’s rapidly changing housing environment.

 If a full fee was the rule in 2006 when completing a deal was so much simpler, why would you now consider cutting the fee of your agent in today’s tumultuous market? You are depending on this person to help you reach your goals in a sale or purchase. In 2006, buyers were willing to pay almost anything to a seller just to get into a home. Banking entities seemed to be willing to mortgage any property for any buyer. The process was rather simple.

Today, a person looking to buy or sell should be willing and ready to pay a full fee for two reasons:
You need an expert guide if you are traveling a dangerous path:

The field of real estate is loaded with land mines. You need a true expert to guide you through the dangerous pitfalls that currently exist. Finding a buyer willing to pay fair market value for your home at a time that there are mass inventories of foreclosures and short sales will take a true real estate professional. Finding reasonable financing can also be tricky in today’s lending environment.
Experts in any profession do not discount their fees; especially when the job is becoming much more difficult.
You need a skilled negotiator

In today’s market, hiring a talented negotiator could save you thousands, perhaps tens of thousands of dollars. Each step of the way – from the original offer, to the possible re-negotiation of that off after a home inspection, to the possible cancellation of the deal based on a troubled appraisal – you need someone who can keep the deal together until it closes.
When an agent is negotiating their commission with you, they are negotiating their own salary – the salary that keeps a roof over their family’s head; the salary that puts food on their family’s table. If they are quick to take less when negotiating for themselves and their families, what makes you think they will not act the same way when negotiating for you and your family? If they were Clark Kent when negotiating with you, they will not turn into Superman when negotiating with the buyer or seller in your deal.

Bottom Line
We believe that famous sayings become famous because they are true. You get what you pay for. Just like a good accountant or a good attorney, a good agent will save you money…not cost you money.

In Real Estate, Keeping Current Matters!

In Real Estate, Keeping Current Matters!

by The KCM Crew on January 10, 2012

There is too much misinformation being spread about today’s real estate market. Studies are being misinterpreted. Prominent names are being used to foster a point even if their quote is from years ago.

As an example, we want to look at a story published last week by The Fiscal Times titled The New American Dream: Rent, Don’t Buy. In the article, they claim:

“Call it the Big Selloff—America is headed toward a future in which fewer people own the spaces they call home… Those trends are just the beginning.”

We are not arguing that the homeownership rate is under downward pressure in this country. We are disputing some of the ‘evidence’ used in the article. Here are three points we want to refute:

The Homeownership Rate IS NOT in a Freefall

The article quotes a Morgan Stanley study from July 2011 which did make the argument that the homeownership rate was trending downward. Many others made the same point at that time. What the article failed to mention is that the homeownership rate unexpectedly increased in the third quarter of 2011! As DSNews reported in early November:

“After falling to a 13-year low during the second quarter, the homeownership rate posted a highly unexpected rise in the third quarter, according to a Census Bureau report.”

The jury is still out as to whether the homeownership rate will continue to fall or whether it has already bottomed out.

The Founders of Case-Shiller ARE NOT Saying Renting is Better

In the article mentioned above, they claim that the team that founded the prestigious Case-Shiller Pricing Index believes that buying makes little sense. The article explains that back in 2006 Robert Shiller presented a study based on data collected prior to 2005 showing that, over time, it made more sense to rent than buy. They use this information to conclude:

“Another skeptic is Yale economist Robert Shiller, co-creator of the Case-Shiller Home Price Index.”

They claim Shiller is a skeptic today based on what he said six years ago!

The major challenge we have with this is that Karl Case, the other founder of the Case Shiller Index, came out ten days ago saying that now is the time to buy. The New York Times in a story published on 12/30/2011 quotes Professor Case as saying:

“If you’re buying a house or apartment to live in and pay for over time, and can afford the payments, then it’s a terrific time to buy.”

Beracha and Johnson DID NOT Conclude That You Shouldn’t Buy

The Fiscal Times article went on to say:

“And in a paper this June in the journal Real Estate Economics, two researchers calculated that over the past 30 years, most often it would have been better to rent than buy.”

They were referring to the great study done by Beracha and Johnson titled Lessons from Over 30 Years of Buy versus Rent Decisions: Is the American Dream Always Wise? We are very familiar with this study as we posted on it back in May of last year. The paper does explain that over the last thirty years the financial benefits of buying vs. renting could be debated.

However, the conclusion of the paper left no room for argument. According to professors Beracha and Johnson, NOW IS THE TIME TO BUY!

“(F)undamental drivers now appear to be in place that favor homeownership over renting in the near term future…

“[This] might seem unwise to many given the recent crash in the real estate markets around the country. However, rent-to-price ratios now seem to be in place along with other fundamental drivers that favor ownership over renting.”

They conclude their research paper with this sentence:

“Conditions (historically low mortgage rates and relatively low rent-to-price ratios) now seem in place to favor future purchases.”

Dr. Johnson, Ph.D. — Florida International University (FIU) and Editor of the Journal of Housing Research, is now a guest blogger on this site and in November shared with us his current presentation on this issue. To download the presentation, go to http://realestate.fiu.edu/buyer-or-renter-nation.html.

Bottom Line

We attempt to keep our readers current on this very rapidly evolving housing market with this blog, our tweets, our facebook posts and our subscription service. The letters K-C-M preface each offering. They actually stand for ‘keeping current matters’. We believe that helping our followers stay on top of the latest information available will help correct the housing market.

The Ship Appears to be Turning

The Ship Appears to be Turning

Today, we are again honored to have Ken H. Johnson, Ph.D. — Florida International University (FIU) and Editor of the Journal of Housing Research as our guest blogger. To view other research from FIU, visit http://realestate.fiu.edu/. Dr. Johnson will also be speaking at NAR’s Conference and Expo in Anaheim later this week. For more information click here. - The KCM Crew

On October 31, CNN Money reported: “Home prices headed for triple dip”.  Reporting on information provided by Fiserv (a financial analytics company), a 3.6% fall in prices on a national basis is expected by next summer.  This will result in the Case-Shiller Home Price Index falling to 35% below its peak in 2006 and marking a triple dip in U.S. housing markets.[1]

Say it ain’t so!  Is housing set for a third dip in five years?  This depend on factors being in place to lessen the impact from market anxiety brought on by worries over a pending wave of foreclosures and the U.S. debt crisis, which we will start to hear more about shortly.

So, what are these factors and what do they tell us?  These factors are really fundamental drivers that encourage individuals to buy versus rent their personal residences.  They are sometimes referred to as housing affordability measures.  The price to income, mortgage payment to income, and a buy versus rent analysis for various markets provide strong evidence that factors are in place to encourage home ownership or favor renting depending on the resulting measurements.  In ongoing research being performed by Beracha and Johnson, these measures are at record levels in favor of buying.[2]  In fact, the price to income ratios in 23 of the 50 states are at 30-year record lows.  The payment to income ratios are at 30-year record low in all 50 states.  A buy versus rent analysis performed in 23 of the nation’s largest metropolitan areas also indicates that hurdle rates (the rates at which potential buyers are indifferent between buying and renting) in all 23 cities are below 25-year average appreciation rates.  All of these results strongly favor purchasing.

What about per capita income and present day prices (relative to past prices)?  Presently, U.S. per capita income is on the rise again and has regained to the level of 2007 (roughly $40,000 per person), while prices of homes on the other hand rest at 2002 levels according to the Case-Shiller Home Price Index.  What about mortgages rates?  Presently, 30-year fixed rates are at near record low levels.

So, let’s put this all together.  Housing is presently more affordable than at any time in the last 30 years.  While income is only at 2007 levels, home prices are even lower coming in at 2002 levels.  All of these factors set the stage for many individuals to favor purchasing over renting.  Thus, while there are grave concerns over the overall health of the economy, fundamental drivers now appear in place to staunch any further significant plunges in home prices. 

The ship appears to be turning.[3]

Endnote

[1] See http://money.cnn.com/2011/10/31/real_estate/home_prices/

[2] Beracha and Johnson (2011) on going research.

[3] This conclusion obviously assumes nothing unprecedented and catastrophic occurs such as the removal of the home interest deduction to combat the national debt or the often predicted foreclosure tsunami actually finally occurs.

5 Tips to Prepare Your Home to Sell

With all the negative press coverage and constant onslaught of challenges facing Sellers, it's easy to lose sight of a critically important truth. Your home is in direct competition with other homes in your neighborhood. Preparing the home and making sure it looks as nice, clean and in good repair as possible will increase the chances of a buyer considering it over the others. A good frame of reference for a buyer showing is a job interview. You want to be well prepared and looking your best. Here are five tips to help give you the competitive edge.


5 Tips to Prepare Your Home for Sale

By: G. M. Filisko

Published: February 10, 2010

Working to get your home ship-shape for showings will increase its value and shorten your sales time.

1. Have a home inspection
Be proactive by arranging for a pre-sale home inspection. For $250 to $400, an inspector will warn you about troubles that could make potential buyers balk. Make repairs before putting your home on the market. In some states, you may have to disclose what the inspection turns up.

2. Get replacement estimates
If your home inspection uncovers necessary repairs you can’t fund, get estimates for the work. The figures will help buyers determine if they can afford the home and the repairs. Also hunt down warranties, guarantees, and user manuals for your furnace, washer and dryer, dishwasher, and any other items you expect to remain with the house.

3. Make minor repairs
Not every repair costs a bundle. Fix as many small problems—sticky doors, torn screens, cracked caulking, dripping faucets—as you can. These may seem trivial, but they’ll give buyers the impression your house isn’t well maintained.

4. Clear the clutter
Clear your kitchen counters of just about everything. Clean your closets by packing up little-used items like out-of-season clothes and old toys. Install closet organizers to maximize space. Put at least one-third of your furniture in storage, especially large pieces, such as entertainment centers and big televisions. Pack up family photos, knickknacks, and wall hangings to depersonalize your home. Store the items you’ve packed offsite or in boxes neatly arranged in your garage or basement.

5. Do a thorough cleaning
A clean house makes a strong first impression that your home has been well cared for. If you can afford it, consider hiring a cleaning service.

If not, wash windows and leave them open to air out your rooms. Clean carpeting and drapes to eliminate cooking odors, smoke, and pet smells. Wash light fixtures and baseboards, mop and wax floors, and give your stove and refrigerator a thorough once-over.

Pay attention to details, too. Wash fingerprints from light switch plates, clean inside the cabinets, and polish doorknobs. Don’t forget to clean your garage, too.

More from HouseLogic
Develop a Landscape Plan to Fit Your Budget

Spring Cleaning Guide

G.M. Filisko is an attorney and award-winning writer who has found happiness in a Chicago brownstone with the best curb appeal on the block. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Previews International - #1 in Miami Luxury Homes Sold

Luxury Homes are Hot Along

The American Riviera

The national media would have you think that the luxury real estate market in America has gone cold. The reality would indicate otherwise. As far as Miami is concerned, cold must stand for Cold Hard Cash!

Ironically back in 1933, when the country was in the throes of the greatest economic catastrophe in our nation’s history, a young entrepreneur by the name Henderson Talbot had an idea. He identified the need for owners of high luxury homes throughout the country to promote their exquisite properties to buyers throughout the world. Prior to this, there was no specific resource for high end residential real estate sales. He seized upon the opportunity and traveled the country, developing the first strategic marketing platform for high end homes the world had ever seen. He would take numerous photographs of the homes with his 16mm camera and together with captivating and detailed descriptions of the homes, Mr. Talbot revolutionized an industry. He called the program Previews:

Today as back then, the Coldwell Banker Previews International name continues as the preeminent leader and benchmark for high luxury homes in America, and has transcended international borders to feature the most exquisite homes all over the world. Ironically as in the dawn of its origins, the need is just as great for exceptional properties to be featured and represented in ways befitting their status and by professionals that are equally suited to the task.

In Miami, the Coldwell Banker Previews International name features prominently throughout the luxury landscape. Here are some revealing numbers for homes offered at $1,000,000 or more to support this claim:

Available Homes - $1M+       =   970

$1M+ Homes Sold or Placed under Contract-Last 30 Days        = 136
Number of Months Inventory = 7.13
Closed Sales ($1M+) in Last 30 Days = 39
Closed Sales ($1M+)–Coldwell Banker Previews Intl= 10 (26%)

*as per Southeast Florida Multiple Listing Service

One in Four $1M+ Miami Homes Sold

Represented by

Coldwell Banker Previews International

Of the thousands of agents and brokerages in the Miami area, Coldwell Banker Previews International stands alone as the standard of excellence and quality performance. With these numbers, would you trust the sale of your most prized possession to anyone else? As a buyer, would you give your confidence to any other organization?

A few Coldwell Banker Previews International

Properties Sold - Last 30 Days

Coconut Grove -3810 Battersea Rd

$1,300,000

1071 San Pedro Ave

$1,375,000

Coral Gables (Cocoplum) - 184 Paloma Dr

$2,300,000

Miami Beach - 1730 W 23 St

$5,600,000

Miami Beach - 68 La Gorce Cr

$6,500,000

Quality-Experience-Resources-Brand Recognition

Industry Leadership –Global Reach

Uncompromising Professionalism

These are the hallmarks of excellence. I am proud to serve my clients among such an exceptional community of professionals. If you are considering the sale or purchase of a home, I am honored to be at your service.

Windows of Opportunity Beginning to Close for Sellers

We have suggested that sellers who need to sell within the next 18 months had a ‘window of opportunity’ to sell at higher prices. They needed to put their houses up for sale immediately before a flood of distressed properties were introduced to the market. This window is beginning to close. The paperwork challenges faced by banks that caused a delay in the foreclosure process over the last ten months are starting to clear. It seems that these houses are now coming to the market.

RealtyTrac reported in their September Foreclosure Report:

“Default notices were filed for the first time on a total of 78,880 U.S. properties in August, a nine-month high and a 33 percent increase from July — the biggest month-over-month increase since August 2007.”

James Saccacio, chief executive officer of RealtyTrac explained:
“The big increase in new foreclosure actions may be a signal that lenders are starting to push through some of the foreclosures delayed by robo-signing and other documentation problems. It also foreshadows more bank repossessions in the coming months as these new foreclosures make their way through the process.”

Diana Olick, of CNBC’s Realty Check quoted a spokesperson for Bank of America:

“ Strong gains like that from July to August demonstrate our progress – primarily in judicial states — clearing more volume to advance to foreclosure once we pass the numerous quality controls we have in place and exhaust all options with homeowners.”

The impact will be felt from coast to coast. New Jersey Superior Court Judge Mary Jacobson recently cleared the way for the top banks to resume foreclosures in the state. The impact this will have on the number of distressed properties can be clearly seen in these statistics reported by Housing Wire:

“In October, New Jersey had the 24th highest foreclosure rate in the country, with servicers filing roughly 5,200 foreclosures that month, according to RealtyTrac. By July, the Garden State’s foreclosure rate dropped to 42nd with just 1,112 filings last month.”

ForeclosureRadar, which handles research in California, Oregon, Washington, Arizona and Nevada, last week reported:

“Foreclosure starts rose in every state.”

Bottom Line

If you currently are selling your home, price it to compel a buyer to purchase it now. Waiting will cause you to compete with an increased number of distressed properties which sell at dramatically discounted prices.

5 Great Reasons to Sell Your House Today

5 Great Reasons to Sell Your House Today

by The KCM Crew on September 6, 2011

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We are often asked “Is the time to sell my home?” The answer to that question is based on what your families’ goals are. If you don’t need or want to move for a few years it might make sense to wait for the housing industry to recover and prices to appreciate. However, if you wish to move within the next six to eighteen months, it is probably better to sell sooner rather than later. Here are five reasons why:

Your House Will Get More Exposure Now Than the Winter

Housing sales usually level off in the summer and then regain momentum in September and October. The spring buyers’ market has passed. Don’t miss the early fall market. It has consistently outperformed the winter season.

Distressed Properties Will Impact Prices

Distressed properties (foreclosures and short sales) on the market will increase this fall and winter. This will put tremendous downward pressure on prices for at least the next 12-18 months. Get your home sold before they become your competition.

Mortgages Will Become More Difficult to Attain

Lending standards are continuing to tighten. There is legislation currently being considered that will make it even harder for buyers to qualify. Less demand will equate to lower prices.

It is the Perfect Time to Move-Up

With prices where they are and interest rates at all time lows, there may have never been a better time to move-up into your dream home. If you move into a more desirable home now, you will be in position to gain larger equity as prices eventually appreciate.

You Get to Move On with Your Life

Probably the most important reason to sell is so you can get on with your life. You are considering selling for a reason. Do not allow a less-than-stellar housing market prevent you from reaching your goals as an individual or as a family. Think about the reasons you are thinking about moving . Are these reasons really important to you? If you have to take less than you were originally hoping to get for your house, your family has a question to ask each other: Is the dollar difference in sales price worth putting off our plans? Only you and your family know the answer to that question.

Have elderly relatives? Which is better- Granny Flat or in Law Quarters?

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  Granny Flat or In-Law Suite? Which is More Prudent?

  If you need to house aging parents or adult children, or if your family is multi-generational, what’s better — an in-law suite or a little granny cottage in the back yard? Read

Visit houselogic.com for more articles like this.

Copyright 2011 NATIONAL ASSOCIATION OF REALTORS®

The Evolution of Belief in the FSBO -Simple Irony or Intergalactic Epiphany? You Decide

We all remember the ads for the "For Sale By Owner" website.. Why pay a Realtor a commission for doing what you can do yourself so easily?

Well, the founder of For Sale By Owner didn't exactly walk the walk, did he?  In fact, he ignored his own hype and hired a Realtor!

A picture is worth a 1,000 words....

What You Must Know About Home Appraisals

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  What You Must Know About Home Appraisals

  Understanding how appraisals work will help you achieve a quick and profitable refinance or sale. Read

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Copyright 2011 NATIONAL ASSOCIATION OF REALTORS®

Energy Pricing: Make Your Home The Next To Sell In Your Community

What is an Energy Price?

Simply put, an Energy Price is a price that will clearly identify a home as the outstanding value in a community, or put another way, it will make it the most likely property sell next.  Ideally, an energy price results in multiple competing offers that puts the Seller in the catbird seat.

How do you know your price is not an energy price?

      -      Few or No showings

-      Lookers, but No Offers

-      More than 2 weeks on the market with little or no activity

These three also may indicate that agents are using your home to sell alternatives on the market in your area.

-      Feedback

-      You have a deadline (job transfer, another home under contract, etc), and time is running out

-      You can’t make the upgrades that competing homes offer

-      The competition has changed.  Competing homes have reduced their prices, but you haven’t.

How do we establish the price of a home?

The value of your home is almost entirely dependent on what someone is willing to pay for it, how much it appraises for, and how long you are willing to wait to find that person. Most sellers are not in the position to wait for the "ideal" buyer who will pay their "ideal" price. They want to find the optimum price at which their home will sell in a limited amount of time. Today, a market cycle is about 3-6 mos, and appraisers will give the greatest weight to homes that have closed within that time in determine the value range of yours. 

Location is critical.  Bear in mind that a community is not only determined by radius.  For example, Coral Gables and Coconut Grove are adjacent to each other, yet they are completely different markets.

Then, we look at square footage, number of beds and baths, and lot size. Next, we'll want to look at amenities sought by buyers. An attached garage, a wood-burning fireplace, an updated kitchen and baths, and spacious rooms are among the factors that generally increase a home's value. Most buyers want good schools, proximity to work and lifestyle, and quiet safe neighborhoods. Any pluses or minuses in these areas will affect the price.

Perhaps equally important are your reasons for selling and how long you can wait. Typically, the most interest is generated in the first two weeks a home is listed. If you want to sell your home fast, you'll want to price it so that it stands out among comparable homes on the market (Energy Price).  Sellers who try to hold out for the highest price in a fluid market like this one, however, usually regret it. We call that “Chasing the Market”, or as they say in boxing, “Leading with your chin”. 

In the first two weeks, you will attract those buyers with the greatest level of motivation to buy; those that have a real need to act immediately.  After that, you start to see investors, bargain hunters, and people who tend to look for signs of desperation.  When an offer comes in, more times than not it will be a low ball offer.  Then you have little choice but to negotiate the best deal you can.

Remember, it is always best to negotiate from a position of strength.  For a Seller, that is when the house is fresh on the market, buyer interest is high and the Seller has the most amount of time on his side.  The energy, therefore, favors the Seller. 

Finally, sometimes time works against both Buyer and Seller.  We have such a situation right now.  As of October 1, 2011, limits on government backed home loans (Fannie, Freddie, FHA, VA) are scheduled to be slashed by act of Congress.  For example, loan limits for FHA mortgages will drop $78,750 from $423,750 to $345,000.

What does this mean?

For Sellers:

-      Less Buyers, Downward pressure on prices in all value ranges, as lender risk increases and rates likely go up.

For Buyers:

-      Harder to qualify for loans, and less money available to borrow at a higher cost.

Remember, if interest rates go up 1%, principal must come down 10% in order to keep the same monthly payment.  This hurts both buyers and sellers. 

Therefore, if you are a serious Buyer or Seller, there is a window of opportunity that closes in about 75 days.  Now is the time to act.  If you are a Seller, Energy Price your home now to be the next one to sell in your community.  If you’re a Buyer, there’s no point in sitting on a fence that may be collapsing under you.  Act now.   

We are in mid-July.  Buying a home with financing takes about 30-60 days to close, short sales notwithstanding.  On the outside, it will be the middle of September before you can close a deal you made today.  Fortunately, my skills and experience has earned me the ability and reputation for closing your deal a lot closer to 30 days than 60. I'm here for you.  Let me help.

Thank you for your time.

7 Reasons to Reduce Your Price

One More Reason:   Interest rates are likely going up, which historically creates downward pressure on property values.  A 1% increase in the mortgage interest rate needs a 10% decrease in principal to maintain the same monthly payment.  If you need to sell your home soon, Sellers should seriously consider price positioning their properties to be the very next one to sell in their respective communities.

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  6 Reasons to Reduce Your Home Price

  While you’d like to get the best price for your home, consider our six reasons to reduce your home price.
  Read

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Copyright 2011 NATIONAL ASSOCIATION OF REALTORS®

Interior Paint - Colors That Sell

Here are a few suggestions of paint colors that enhance the visual appeal of home interiors. In addition to the items covered in my previous post, Sellers can enhance the attractiveness of a home by using soft warm colors to gently guide the eyes and direct a buyer's perception around the home.

There are also a few colors you need to be very careful with. Blues, pinks, yellows, grays and blacks tend to overpower the subconscious, and actually become the focal point of a room or a home. It is safer to stay away from them.

What Buyers Are Looking For

In most cases by the time a Buyer walks into your home for the first time, he/she/they have already narrowed down their preferences in terms of price range, location, number of bedrooms/bathrooms, and major features (pool, garage, etc.).

By the time a Buyer decides he/she/they would like to see your home in person, they have satisfied at least 78% of the buying criteria.

If they have searched through the internet and found quality descriptions and photos of your home, the percentage of predetermined satisfaction goes up to 90%.

Of all the interior aspects of a home that Buyers focus on when visiting a home, 72% is entirely within the ability of the Seller (and his/her/their Realtor) to manage and improve.

By addressing things like odors, clutter, de-personalizing and minimizing the decor, cleaning or replacing the floor coverings, and making minor repairs around the house, you dramatically increase your chances of being the next home in your neighborhood to sell!