Good article. It reiterates many points I have to discuss with clients often. I’ll elaborate on a few of these points in future blogs.
Bankrate.com Dec 9, 2013
Real estate agents see it all.
From the unmade beds to the overstuffed garages to the “What were they thinking?” decor. Over the years, they learn a thing or two: Why some houses sell, while others linger on the market. Why some promising buyers never make it to the closing table. How to get a better deal on the mortgage. Even just how much the other agents stand to make on your home. And the good news is, they want to share. Whether you’re a buyer, seller or both, here are six things real estate agents wish you already knew.
1. Want to sell quickly? Price it just under the market
In today’s market, sellers are again optimistic on the value and price of their homes — “but buyers aren’t,” says Ron Phipps, principal with Warwick, R.I.-based Phipps Realty and past president of the National Association of Realtors. “Your challenge as a seller is to price the house so that it is compelling,” he says.
What that means in dollar signs: “Set a price slightly below market value,” he says. Just “a fraction.”
For example: If similar homes in your neighborhood are clustered around $210,000, you might price yours at $200,000 or $198,000, he says.
What the agent wishes you knew:”The longer a house is on the market, the less likely you are to get fair value,” Phipps says. “So you really want to position yourself to be the one that sells, not the one that languishes.”
And that old adage of not wanting to leave any money on the table? Still valid.
If you’re turning around and buying a home, and you already have cash in hand, thanks to a fast sale, “that puts you in a very powerful position,” Phipps says.
2. The preapproval letter is just the beginning
For many potential buyers, frugality ends the minute they get preapproved for a mortgage, Phipps says. That’s when they start running up the cards and opening new lines of credit to buy things for their home-to-be.
But that preapproval letter is just one of the first refreshment stations of the homebuying marathon, not the finish line.
Just before closing, a lender will re-examine a prospective buyer’s financial situation — complete with a recent copy of the credit history and other updated information.
If those numbers have changed for the worse (salary decrease, higher card balances, new lines of credit), then the applicant could get clocked with a higher interest rate or even lose the loan. “The number of buyers who get denied is significant,” Phipps says. What the agent wishes you knew: Never get new loans or start using credit cards more heavily until after you’ve actually closed on the home.
Even better, retain your frugality until you’ve been in the home for a few months and have a good sense of how homeownership affects your finances, Phipps says.
3. Selling a house probably takes longer than you think
If you’re selling a home, it’s important to understand the timeline, says Jeffry Wiren, principal broker with Re/Max Equity Group and past president of the Portland, Ore. Metropolitan Association of Realtors.
“And that’s something most people don’t understand,” he says.
Underestimating the time it takes — and building a schedule around those unrealistic expectations — adds stress, Wiren says. Instead, realize how long the process takes in the real world (not just your head) and plan accordingly. Another important factor: Different markets (and prices) move at different speeds, he says.
Wiren’s sales schedule breakdown:
• Getting your home in shape: two weeks
• Average time on the market (varies widely with location and price): 2 1/2 to three months
• Negotiating after an offer: one week
• Preparing to close (assuming a traditional transaction): 30 to 45 days
What the agent wishes you knew: A smart seller allows a minimum of four to six months to sell, Wiren says. And that’s if you have a home that’s priced right in a good market with one solid offer that makes it to the closing table.
4. Not all ‘buyers’ are able to buy
To prove their worthiness, sometimes prospective buyers will show a prequalification letter, Wiren says. “And that means nothing.” That’s because in a prequalification, lenders usually don’t verify buyers’ information. A preapproval, on the other hand, involves third-party verification.
“‘Prequalified,’ that means they’ve talked with a lender and said, ‘I have good credit and I make X number of dollars a year,'” Wiren says. Based on that, the lender responds that the buyer can reasonably expect to borrow a certain amount — if those self-supplied facts are accurate and there aren’t any negatives, he says. Most lenders don’t research those details until the buyer applies for a loan, he adds.
What the agent wishes you knew: Serious (and smart) buyers are “preapproved.” That means they’ve already applied for the loan, the bank has verified their financial information and (if the numbers remain the same until closing) it promises to loan a specific amount at a specific interest rate.
Still, after an offer, smart agents will call the lender and verify that the prospective buyer is preapproved for the necessary amount, Wiren says. At the same time, that agent will verify that the lender would have no problem closing in the expected time period — usually 30 to 45 days.
5. Yes, it really does have to smell good
Sellers sometimes drag their feet on little details that make a big difference, Wiren says. He can’t count the number of clients who asked, “Does it really matter if we have the carpets cleaned or take the family photos off the wall?”
“The answer is yes,” Wiren says. “A buyer needs to walk in and have it look good, feel good and smell good.”
Sellers should put themselves in the shoes of prospective buyers — and try to see the house for the first time, he says.
The home should be kept showroom-ready. “It’s a regular occurrence that I walk into a home with a buyer” and find “beds unmade and underwear on the floor,” Wiren says. In spite of an appointment, “I don’t see a home that’s ready.”
What the agent wishes you knew: A mess leaves an impression that’s “hard for a buyer to overcome,” Wiren says.
His checklist for a showing:
• Home: Clean. (And smelling good.)
• Temperature: Heated (or cooled) for comfort.
• Lights: Left on to welcome guests.
• Snacks or soft drinks: A nice touch.
The impression you want: “Warm, inviting and comfortable,” Wiren says.
6. We don’t make as much as you think
Chances are the agent you hire to sell your house — or find a new one — isn’t getting as big a cut of the deal as you might think, says Graham Stiles, senior vice president with Alexander Chandler Realty and HighRises.com.
“Six percent isn’t anywhere near what we’re taking home,” he says. In fact, it’s more like “1 percent to 1 1/2 percent,” on average, he adds.
While the two sides will split that commission, those agents, in turn, each split their share with their broker, Stiles says.
What the agent wishes you knew: Unless your agent is handling both sides of the transaction, figure he or she is getting roughly one-quarter of the commission, Stiles says.
And that 6 percent commission is by no means a given in this day and age, Phipps says. “There’s always a range of fees in the marketplace. Each broker sets his or her own fees independently.”
“I spend a lot of time on the topic of commissions,” Stiles says. And still, the idea that agents are getting all or even half the commission, he says, “is still one of the biggest misconceptions.”