"Open House" - Maryland Real Estate Blog

Perception vs. Reality Series – Volume 3 Do Real Estate Agents Make Too Much Money?

I hear this a lot. "I can't believe I am paying one person so much money." Let's say, for instance, you are paying $18,000 in commission (Oh, by the way, commissions are 100% negotiable) on your $300,000 house. Wow!! That does seem like a bunch of money. I would certainly agree that is too much for one person for that house price. But this is how it actually works.

First, commissions are not paid to a person; they are paid to the brokerage or company that you hire. The brokerage typically keeps a percentage of that commission and disperses the remainder back to your individual agent.

Second, that entire commission is not earned by one company. Commissions are generally "split" with the company who represents the buyer of your home. It is customary in Maryland that the seller of each home offers a commission to their agent and the agent who brings a buyer. That means that a portion, generally half, of the overall commission is paid to the buyer's company. That is why it always makes sense to hire an agent when buying a home. Your agent's commission is paid by the seller. Services for free!

Ok, so consider our scenario listed above. You have agreed to pay an $18,000 commission and, as we now know, only half of that will stay with your agent's brokerage.  That leaves $9,000 for your agent and their company.  Let's assume the agent has an agreement with their company to keep 50% of each commission. That leaves $4,500 for your agent. Doesn't sound bad, huh? Well, first you have to pay income tax. You have to remember, Realtors are all independent business people. Taxes are not automatically subtracted from "paychecks". Let's assume 33% for taxes, FICA, and other government withholdings. That leaves $3,015. Health insurance is expensive at around $250/mos.; leaves $2765. Since agents are all independent business people, all expenses are the responsibility of each individual. For me, personally, I spend about $3,000-$5,000 (depending on how many houses I have for sale) per month on fees, dues, subscriptions, advertising, office supplies, etc. etc. Let's say I spend an average of $4,000; that leaves negative $1,235. NEGATIVE!

Oh yea, I also own a house, car, like to eat food at least once a day and take a trip from time to time. Include personal expenses and I am way in the hole with one house sold. So as you can see, $18,000 very quickly turns into a negative number for an agent. Agents who sell one house per month generally don't survive in this business. Many people jump into real estate thinking it is easy and can "get rich quick". I can tell you, it is not easy and every penny earned is most definitely deserved.

Jim Ellis – Re/Max Elite Realty

Jim can be reached at 410.569.4663 or jim.ellis@remax.net.

MORTGAGE RESCUE SCAMS: TOP 10 WARNING SIGNS

The U.S. Department of the Treasury has issued a consumer advisory detailing common mortgage modification scams. It pays to be aware of fraudulent tactics that con artists may use to lure distressed homeowners into their trap.

1. “Pay us $1,000, and we’ll save your home.” No legitimate counselor will require you to pay such a large sum before they do any work for you.
2. “I guarantee I will save your home – trust me.” Unrealistic promises are a key tip-off that an arrangement may not be legitimate.
3. “Sign over your home, and we’ll let you stay in it.” This is a dangerous proposition: signing over your home gives another person the power to sell the house or evict you, and you’ll still be liable for the mortgage.
4. “Stop paying your mortgage.” Never stop paying your mortgage unless you have contacted your mortgage lender directly!
5. “If your lender calls, don’t talk to them.” You should keep in close touch with your lender, as their understanding of your situation is crucial to a satisfactory resolution.
6. “Your lender never had the legal authority to make a loan.” False arguments like this are meant to convince you that you are not obligated to pay your mortgage. Don’t fall for them!
7. “Just sign this now; we’ll fill in the blanks later.” Never sign anything you haven’t read in detail and clearly understood, and don’t let anyone pressure you into signing.
8. “Call 1-800-Fed-Loan.” It’s easy to make a scam look like part of a legitimate government program. Call your lender to see if you qualify for federal assistance—which does not require you to pay high fees.
9. “File for bankruptcy and keep your home.” Bankruptcy only stops the foreclosure process temporarily. Stop paying your mortgage, and your lender will eventually foreclose upon your home.
10.  “Why haven’t you replied to our offer? Do you want to live on the streets?” High-pressure tactics are a sure sign of shady business practices. Legitimate foreclosure counselors never treat a client in such a way.

If you guys ever have questions about mortgage issues, don't hesitate to call me.  I am always available as a free service to any of you if you are having problems or need help.  Don't get swindled!

I can be reached at 410.569.4663 or jimellishomes@comcast.net.

Happy Holidays!

Working with Me, a Referral Agent.

I am what is called a referral agent.  That means that about 90+% of all of my business is referred to me by past clients, friends and family.  The benefit to using a referral agent is that my commitment to my clients is long term.  I continue to serve my loyal clients well after the sale or purchase of their home.

How can I serve folks after the fact?  I have created what is called a Client Appreciation Program; CAP for short.  The CAP comes with many benefits.  For instance, all of my clients occassionally receive an item of value in the mail.  Sometimes with coupons or other valuable pieces of information.

You see, I come across many outstanding people in my business.  Part of my commitment is to create and maintain long lasting relationships with businesses and professionals in the areas that I serve.  Then I encourage my clients to call me whenever they are in need of service or trade and I am ready with a trusted referral.

In addition to the items of value, I host at least one client party a year.   I have thrown social parties, education events like real estate investing seminars, sponsored habitat for humanity builds, segway tours, charity concerts, golf tournaments, and others.  These events are all exclusive to my clients! Additionally, everyone gets a market analysis of their home once a year.  Most folks don't know how much their home is worth, so this is a welcomed service.  And this is only the tip of the iceberg . . .

The bottom line . . . I don't do what other agents do.  You would never see my face on a billboard or bus bench, or in a newspaper.  I never send out those postcards you get in the mail that go directly in the trash.  People hire me to do something with their real estate, not spend time and resources on large ads and mass mailings.  I spend that time working for you.  In exchange, I ask that if you ever hear of anyone in the market to buy or sell a home in Maryland, that you think of referring them to me.

The benefit to you?  You are a life long member of my CAP.  Also, if I don't serve and fulfill the needs of my client during the transaction of their single largest asset, then folks would not be referring me to their friends and family.  The benefit to your friends and family?  I don't cost any more than the next agent and you have peace of mind knowing that those close to you are treated with the respect and professionalism they deserve.  Thanks for reading!

If there is topic in real estate or other related field that interests you, let me know, and I’d be happy to research and present an essay or opinion on the matter. . .

Jim can be reached outside of this blog at 410.569.4663, Jim.Ellis@ReMax.net or www.JimEllisHomes.com

The Ed Norris Show

Friday morning, June 12th, at 7:30 AM, I will be appearing on The Ed Norris Show.  The show is rated #1 among radio talk shows in the Baltimore area and can be heard at 105.7 FM.  Can't listen on the radio?  Go to www.1057thefan.com to listen for free on line.  Thanks for your support.

Jim

Jim can be reached at 410.569.HOME (4663) or email jim.ellis@remax.net

Perceptions vs. Reality Series – Volume 2 Real Estate Agents are Salespeople

Let me ask you this . . . If you were buying a house. You know, the single largest investment of your life. The place you will live for several years. Would you buy it because a salesperson talked you into it? Hell no!! A salesperson might be able to sell you a stereo or a toaster. Maybe even a car. But a house? I don't think so.

My job is not to "sell" you anything. I am an educator, adviser, project manager, marketer, negotiator, (in this market, therapist), and an array of other jobs. Real estate agents who try to sell houses to people are slimy. When good agents "make a sale", they have guided, communicated and advised their client through a successful deal. And that's all I have to say about that.

Jim Ellis

Jim can be reached at 410.569.4663 or at Jim.Ellis@ReMax.net.

Perception vs. Reality Series - Volume 1 Buyer's Agent Commission

 In Maryland it is customary that the seller of the house pay the commission of their agent, the listing agent, AND the agent who brings a buyer.  Therefore if you are thinking about entering the real estate market as a buyer, don't worry about having to pay your agent a commission.  They will be taken care of by the seller while you enjoy free professional services.  Don't be fooled into paying any commissions to your buyer's agent.  If you are asked to pay a buyer's commission, surprise your agent by asking how much the seller is offering!

FYI-Most companies, including mine, charge a nominal administrative fee.

If you have any questions don't hesitate to ask. 

Jim

Real Estate Perceptions vs. Reality – An Introduction

As in many of our professions, the realities of what we do everyday don't always match the public's perception of what we actually do. Real estate is no different. In fact, some of the perceptions that exist in real estate today are the opposite of the truth! There are many origins of these perceptions. Some are media driven and many are passed down from our parents and grandparents. What was common place decades ago is not so in today's real estate world.

Over the next several weeks I will be writing about an array of false-itudes in the real estate industry. As you think about moving or are counseling future home buyers and sellers, feel free to use this series as a reference. My goal is for each and every one of you to be able to make an informed and educated decision about everything real estate. As always don't hesitate to call or send an e-mail with your thoughts and questions.

Jim

jim.ellis@remax.net

Loyalty and Real Estate?

The Ravens have announced that free agent linebacker Ray Lewis will sign a three year $21 million contract. Like the Baltimore Oriole's Cal Ripken, Lewis will spend his entire career with the same team. With the evolution of free agency in professional sports, this type of loyalty from a player (or team, for that matter) is very rarely witnessed.

Business, generally speaking, over the last several decades has morphed into a pseudo free agency business model. Most businesses seem to be interested in generating volume without loyalty or service. Real estate, in particular, has experienced a noticeable decline in client loyalty. Many agents work with a client and once the transaction is completed, the agent disappears from the client's radar in search of the next deal.

Not to sound like Jerry Maguire, but less clients and more service is where our business minds should be. As a Realtor, my business model is centered around serving my clients before, during and well after our transaction. My goal is to be there whenever they have a problem or question about their home and to offer an array of services through the years. Loyalty can be a two way street. Because of the high level of service I provide, many of clients refer me their co-workers, friends and family.

Click Here to See the Benefits of Working with a Referral Agent

Jim Ellis

Selling Your Home in a Buyer's Market

What it really comes down to is distinguishing your property from the competition.  The inventory of homes in every area of our state, at every price range, is so high that, more than ever, we have to consider the competition (other homes for sale).

The biggest mistake sellers make is overpricing their home.  If you chose a list price that is too high, then all of the subsequent distinguishing factors are null; a huge waste of time and money.  Traditionally, the rule of thumb is to look at the most recent and comparable sales in your area.  I tell my clients all the time, "You are only as good as the last home sold!"  However, in this day and age, you must also consider the other homes currently for sale in your area.  If there is a home in great condition comparable to your home and priced $20,000 below the most recent sales, then you MUST consider that when setting the list price.

Distinguishing Factor #1: Have a buyer's agent commission study done.  Disclaimer:  Real estate commissions are 100% negotiable.  It is customary in Maryland that the seller of a home offers a commission to both their agent and the agent who brings a buyer.  In most markets in our area, the inventory for any style of home is incredibly high.  In other words, a buyer often has 2-3 dozen choices that fit their needs and budget.  A way to ensure that a buyer is taken to your home in the first group of showings is to offer a competitive commission to the buyer's agent.  The average buyer only looks at about 10 houses before they make a decision.  Make sure your home is included in the first ten.

Distinguishing Factor #2: 21st Century Advertising - About 85% of buyers start their home search on the Internet.  Conversely, in 2007 less than 2% of homes were sold because of a combination of an open house and a sign in the yard; 6% were sold because of a newspaper ad.  The age of putting a sign in the yard and an ad in the paper are over.  If these traditional marketing tools are no longer effective and 85% of buyers are looking on the net, then it only makes sense to focus the majority of the marketing effort to the world wide web.  The listing, at a minimum, should appear in the Multiple Listing Service (#1 site for Realtors) and Realtor.com (#1 national search site for consumers).   Other avenues would include homesdatabase.com (#1 local search site), homes.com (top 5 national site), zillow.com and craigslist.com.  These web ads should include multiple high quality digital photos, virtual tours and movies.  The reason why open houses are no longer effective is because a buyer can sit in the their living room in their pj's and take a virtual open house via the web.  Many buyers won't take time to look at a listing on the net if it doesn't have more than one photo.  Consequently, they won't ever visit your home in person.

Distinguishing Factor #3: Home Staging - The idea of home staging began on the west coast a few years back and has been slowly working it's way east.  Studies have shown that staged homes sell about 30% faster and for more money than non-staged homes.  Staging includes interior and exterior staging (front of house landscaping is often a must!).  Once your home is listed at the correct price, you have set a competitive commission for the buyer's agent and allowed the buyer to preview high quality photos of your home, it is now time to make a great first impression in person.  This will cost the seller a few bucks to properly and professionally stage a home.  It can cost anywhere from $80 to several thousand dollars depending on many factors.  However, if your mortgage payment is $1800/mos and you spend $1800 on staging and your home sells even one month faster for your asking price, then it is certainly worth the $$.

The key to today's market is not only about setting the right price, but also outshining your neighbor's homes that are also on the market.  I would suggest asking your real estate professional to preview other homes for sale in your area and ask her/him to consider them when suggesting the price of your home.  My goal for each of my seller clients is to position their home in the market in such a way that it is the next one sold in the neighborhood.  Good luck!

If there is topic in real estate or other related field that interests you, let me know, and I’d be happy to research and present an essay or opinion on the matter. . .

Jim can be reached outside of this blog at 410.569.4663, Jim.Ellis@ReMax.net or www.JimEllisHomes.com