In the real estate business there are many hidden differences between companies that you should know about, as they could affect what price you get for your property and how easily you sell it.
One major difference is their policies when doing business with each other, specifically the showing of your home to other company’s clients
Some companies have a “stand down” policy which means that during the first two weeks your home is listed with them, they’ll keep the listing to themselves by discouraging salesmen from other companies bringing their buyers along.
They do this in two ways:
(1) By refusing to allow salespeople working for competing real estate firms to show buyers through properties that they have listed.
(2) By not paying the other company the 30 percent share of the commission that would be considered normal practice, but instead offering only a token buyer referral fee of say, 10 percent.
Now this still sounds like good money – maybe $1600 on a sale of $400,000. But what you have to remember is that the salesman gets only a portion of that amount – maybe $800. So any salesperson will ask themselves, “Why would I take my buyer to a listing where I’ll only get $800, when I could take them to one where I’d get paid $2400?”
Of course a company with that sort of policy will give all sorts of reasons for it, but the reality is they simply want to keep as much of the commission “in-house” as they can. But unfortunately, it’s hardly a policy that is in your best interests.
The same problem occurs with the so-called discounter, “hold-your-hand” type real estate agencies. Even if the discounter does pay the competing company 30 percent, it’s a 30 percent slice of a much lower commission.
Moreover, it will also result in 15 percent of a much lower amount for the salesperson, which isn’t exactly going to fill them with enthusiasm for selling your property.
So here’s the thing to remember: When you’re choosing a real estate agency and salesperson, if you want more buyers (and who doesn’t?), make sure the company you choose encourages other agencies to want to do business with them
It’s in their best interests to do so – and it’s certainly in your best interests too.
Tuesday, May 27, 2008
Thursday, May 22, 2008
Why Houston housing has avoided boom and bust
Pinched this off www.pc.blogspot.com the very best political blog in the world.
Here's a lesson that town planning advocates everywhere should note. While most of the American housing market has experienced boom and bust in the face of expansionary Federal Reserve policies, housing in Houston has remained relatively immune -- even though it's been at the epicenter of rapid economic growth due to the commodities boom.
The reason? While most of the western world is under the thumb of town planners, with the result that housing in much of the western world has become seriously unaffordable, the city of Houston remains unzoned, and its housing among the most affordable anywhere.
Even the Federal Reserve has noticed the phenomenon, and has begun to realise that zoning and regulating land is destructive. Says a new report by the Dallas Fed, the more unregulated US housing markets have weathered increased demand not with price appreciation, which is how it has played out in most western markets, but largely with new construction. This is essentially because it's very much easier to build new homes in Houston. If it had been set up as a laboratory experiment to prove the failure of zoning, it couldn't have been done better:
Given that Houstonians had access to the same new types of mortgages as the rest of the country and that Houston has had greater population growth than other large metros, we might expect price appreciation to be stronger in Houston than elsewhere. However, the opposite has been true. Houston’s large supply of land means that demand growth primarily results in more construction, not higher prices... At $155,800, Houston’s median house price is the third lowest among the 12 largest U.S. metropolitan areas and is less than half the average for these cities (Table 4). Houston’s median price is lower than even the national average, which includes inexpensive rural areas... By comparison, the median house price in metropolitan San Francisco, where zoning laws and building codes are very strict, is $825,400. This result—more zoning bringing higher prices—is a robust one. Economists Edward Glaeser and Joseph Gyourko find that house prices across the country are positively related to the degree of zoning and regulation... But with plenty of unzoned neighborhoods remaining [in Houston], Houston house prices, on the whole, are restrained near construction costs.
You would think that news like this would attract the attention of everyone struggling to come to terms with the crisis in affordable housing. You would think that even the most enthusiastic advocate of giving power to town planners might at least pause to reconsider their zeal. That is, if evidence and affordability actually mattered to them more than political power.
Here's a lesson that town planning advocates everywhere should note. While most of the American housing market has experienced boom and bust in the face of expansionary Federal Reserve policies, housing in Houston has remained relatively immune -- even though it's been at the epicenter of rapid economic growth due to the commodities boom.
The reason? While most of the western world is under the thumb of town planners, with the result that housing in much of the western world has become seriously unaffordable, the city of Houston remains unzoned, and its housing among the most affordable anywhere.
Even the Federal Reserve has noticed the phenomenon, and has begun to realise that zoning and regulating land is destructive. Says a new report by the Dallas Fed, the more unregulated US housing markets have weathered increased demand not with price appreciation, which is how it has played out in most western markets, but largely with new construction. This is essentially because it's very much easier to build new homes in Houston. If it had been set up as a laboratory experiment to prove the failure of zoning, it couldn't have been done better:
Given that Houstonians had access to the same new types of mortgages as the rest of the country and that Houston has had greater population growth than other large metros, we might expect price appreciation to be stronger in Houston than elsewhere. However, the opposite has been true. Houston’s large supply of land means that demand growth primarily results in more construction, not higher prices... At $155,800, Houston’s median house price is the third lowest among the 12 largest U.S. metropolitan areas and is less than half the average for these cities (Table 4). Houston’s median price is lower than even the national average, which includes inexpensive rural areas... By comparison, the median house price in metropolitan San Francisco, where zoning laws and building codes are very strict, is $825,400. This result—more zoning bringing higher prices—is a robust one. Economists Edward Glaeser and Joseph Gyourko find that house prices across the country are positively related to the degree of zoning and regulation... But with plenty of unzoned neighborhoods remaining [in Houston], Houston house prices, on the whole, are restrained near construction costs.
You would think that news like this would attract the attention of everyone struggling to come to terms with the crisis in affordable housing. You would think that even the most enthusiastic advocate of giving power to town planners might at least pause to reconsider their zeal. That is, if evidence and affordability actually mattered to them more than political power.
PERFECT HUSBAND!
Several men are in the changing room of a golf club. A mobile phone on a bench rings and a man engages the hands free speaker-function and began to talk. Everyone else in the room stops to listen. MAN: 'Hello'
WOMAN: 'Darling, it's me. Are you at the club?'
MAN: 'Yes'
WOMAN: 'I am at the shopping centre and found this beautiful leather coat. It's only £1,000. Is it OK if I buy it?'
MAN: 'Sure, Go ahead if you like it that much.'
WOMAN: 'I also stopped by the Mercedes dealership and saw the new 2006 models. I saw one I really liked.'
MAN: 'How much?' WOMAN: '£70,000'
MAN: 'OK, but for that price it should come with all the options.'
WOMAN: 'Great! Oh, and one more thing ... The house I wanted last year is back on the market. They're asking £950,000' MAN: 'Well, then go ahead and give them an offer of 900,000.
They will probably take it. If not, you can go the extra 50 thousand.
It really is a pretty good price.'
WOMAN: 'OK. I'll see you later! I love you so much!!'
MAN: 'Bye! I love you, too.'
The man hangs up. The other men in the changing room are staring at him in astonishment, mouths agape... He smiles and asks: 'Anyone know who this phone belongs to???'
WOMAN: 'Darling, it's me. Are you at the club?'
MAN: 'Yes'
WOMAN: 'I am at the shopping centre and found this beautiful leather coat. It's only £1,000. Is it OK if I buy it?'
MAN: 'Sure, Go ahead if you like it that much.'
WOMAN: 'I also stopped by the Mercedes dealership and saw the new 2006 models. I saw one I really liked.'
MAN: 'How much?' WOMAN: '£70,000'
MAN: 'OK, but for that price it should come with all the options.'
WOMAN: 'Great! Oh, and one more thing ... The house I wanted last year is back on the market. They're asking £950,000' MAN: 'Well, then go ahead and give them an offer of 900,000.
They will probably take it. If not, you can go the extra 50 thousand.
It really is a pretty good price.'
WOMAN: 'OK. I'll see you later! I love you so much!!'
MAN: 'Bye! I love you, too.'
The man hangs up. The other men in the changing room are staring at him in astonishment, mouths agape... He smiles and asks: 'Anyone know who this phone belongs to???'
Sunday, May 11, 2008
Saving Money or Making Money??
When business starts to slow – as real estate has recently, the real estate business people start to find ways to cut costs.
Finding ways to cut costs is always good practice, but the fact is, real estate businesses have to be careful not to cut off their nose to spite their face.
What I’m talking about is the practice of cutting costs in areas critical to the business. For example reducing paper and energy wastage is a good cost-saving idea, but cutting back on advertising the brand is a bad idea.
The same goes for property vendors. As the market begins to slow, vendors inevitably have to reduce their asking price. To compensate they often make the mistake of chopping other costs such as high-impact advertising and professional photography. Some opt to use real estate companies that don’t charge commissions.
While on the surface these all sound like good ways to save money, the so-called savings may well end up costing you big time when you fail to achieve a good price for your property.
As an example, let’s say you’re trying to save money, so you do without the $3000 marketing campaign. You save a further $300 by not bothering with professional photos, and even more by going with a discount real estate company.
Say you save $6000 on commission – that’s a total of around $10,000.
“That’s good,” you say.
But does it really work out that way? Not often.
I’ll assume that you have been realistic about your price. You go to market with a small advertisement featuring the usual fantastic photo of the garage door – the one that looks like everyone else’s photo.
Firstly, ask yourself this: Which home is likely to been seen amongst ads for the other 2000 houses on the market in Tauranga at the moment? Will it be the advertisement using a photo of your garage door taken by your real estate agent and squashed into a 6cm x 5cm space with a dribbly script about how many rooms it has? Or will it be the 14 x 18cm high-angle, professionally shot, full-colour photo, with a well crafted script?
The difference between the two is enormous and all going well, the latter marketing method will attract multiple buyers who will make offers on your property while competing with others wanting to do the same, thereby driving up the ultimate price.
As for the discounting brands, they usually have their sales team on retainers plus bonuses. Or they may even pool their listings and sales and divide the dosh amongst them. Now ask yourself this question: “If discounting commissions was an effective way to do business, why aren’t they more successful than so-called “high commission” companies?” Remember The Jones?
Two more questions: “If the company gives away their own money as a means of getting my home listed, how are they going to treat my money when they supposed to be negotiating on my behalf?
And, “If I want an agent to be hungry for a sale, would someone on straight commission be more effective at achieving that sale, or an agent who gets paid a salary regardless?
In a nutshell, the most important question to ask yourself when selling your house is this: “Do I want to save money or make money?”
Price it right, market it well, and get a good negotiator. Remember, good things cost money!
Finding ways to cut costs is always good practice, but the fact is, real estate businesses have to be careful not to cut off their nose to spite their face.
What I’m talking about is the practice of cutting costs in areas critical to the business. For example reducing paper and energy wastage is a good cost-saving idea, but cutting back on advertising the brand is a bad idea.
The same goes for property vendors. As the market begins to slow, vendors inevitably have to reduce their asking price. To compensate they often make the mistake of chopping other costs such as high-impact advertising and professional photography. Some opt to use real estate companies that don’t charge commissions.
While on the surface these all sound like good ways to save money, the so-called savings may well end up costing you big time when you fail to achieve a good price for your property.
As an example, let’s say you’re trying to save money, so you do without the $3000 marketing campaign. You save a further $300 by not bothering with professional photos, and even more by going with a discount real estate company.
Say you save $6000 on commission – that’s a total of around $10,000.
“That’s good,” you say.
But does it really work out that way? Not often.
I’ll assume that you have been realistic about your price. You go to market with a small advertisement featuring the usual fantastic photo of the garage door – the one that looks like everyone else’s photo.
Firstly, ask yourself this: Which home is likely to been seen amongst ads for the other 2000 houses on the market in Tauranga at the moment? Will it be the advertisement using a photo of your garage door taken by your real estate agent and squashed into a 6cm x 5cm space with a dribbly script about how many rooms it has? Or will it be the 14 x 18cm high-angle, professionally shot, full-colour photo, with a well crafted script?
The difference between the two is enormous and all going well, the latter marketing method will attract multiple buyers who will make offers on your property while competing with others wanting to do the same, thereby driving up the ultimate price.
As for the discounting brands, they usually have their sales team on retainers plus bonuses. Or they may even pool their listings and sales and divide the dosh amongst them. Now ask yourself this question: “If discounting commissions was an effective way to do business, why aren’t they more successful than so-called “high commission” companies?” Remember The Jones?
Two more questions: “If the company gives away their own money as a means of getting my home listed, how are they going to treat my money when they supposed to be negotiating on my behalf?
And, “If I want an agent to be hungry for a sale, would someone on straight commission be more effective at achieving that sale, or an agent who gets paid a salary regardless?
In a nutshell, the most important question to ask yourself when selling your house is this: “Do I want to save money or make money?”
Price it right, market it well, and get a good negotiator. Remember, good things cost money!
Get Your Price Right
All the “end is nigh” commentary about decreasing house prices should no longer be considered doomsday fear mongering that can simply be ignored.
On the contrary, if you fail to accept this truism it could cost you a lot more when you do eventually sell your home.
In a falling market, if you don’t price your property correctly right from the start, you could eventually find yourself dropping the price much lower than what you may have accepted had you got it right in the beginning.
What you need to do to avoid this harrowing experience is to ask yourself, “What’s the lowest price I will take now?”
Then ask yourself what you won’t accept, price your house just above that level and get the house sold.
Cheery stuff eh? Well all is not lost. Well, not yet, anyway. If you start to look a little more objectively at what is going on you can still make some money. If you’ve been in your home for a few years, keep thinking positively by contemplating your aggregate financial gain over that time rather than dwelling on the peaks and troughs that appear by looking at last year’s sales figures as opposed to this year’s.
If, on the other hand you are one of those unfortunate people who are staring down the barrel of a mortgagee auction, limit the damage by pricing your property at the lowest figure you’re prepared to accept, right from the start. Just as importantly, find yourself an agent who isn’t afraid of telling you the truth.
Remember, he (or she) isn’t your friend. He is the expert you are paying a lot of money to tell you what needs to be done. Tell him everything he needs to know from the start and then let him get on with his job. That means being prepared for him to give you what may sound like bad news. Remember this: it isn’t bad news, it’s the facts.
Finally, think about this for a moment. There are nearly 2000 houses on the market in this area. Less than 150 of them sold last month, and the owners of the ones that did sell, got their prices right.
They implicitly followed the economic axiom that says when supply is high, demand is low. For your home to be in demand and ultimately sold, it must priced at the low end of the supply.
END
On the contrary, if you fail to accept this truism it could cost you a lot more when you do eventually sell your home.
In a falling market, if you don’t price your property correctly right from the start, you could eventually find yourself dropping the price much lower than what you may have accepted had you got it right in the beginning.
What you need to do to avoid this harrowing experience is to ask yourself, “What’s the lowest price I will take now?”
Then ask yourself what you won’t accept, price your house just above that level and get the house sold.
Cheery stuff eh? Well all is not lost. Well, not yet, anyway. If you start to look a little more objectively at what is going on you can still make some money. If you’ve been in your home for a few years, keep thinking positively by contemplating your aggregate financial gain over that time rather than dwelling on the peaks and troughs that appear by looking at last year’s sales figures as opposed to this year’s.
If, on the other hand you are one of those unfortunate people who are staring down the barrel of a mortgagee auction, limit the damage by pricing your property at the lowest figure you’re prepared to accept, right from the start. Just as importantly, find yourself an agent who isn’t afraid of telling you the truth.
Remember, he (or she) isn’t your friend. He is the expert you are paying a lot of money to tell you what needs to be done. Tell him everything he needs to know from the start and then let him get on with his job. That means being prepared for him to give you what may sound like bad news. Remember this: it isn’t bad news, it’s the facts.
Finally, think about this for a moment. There are nearly 2000 houses on the market in this area. Less than 150 of them sold last month, and the owners of the ones that did sell, got their prices right.
They implicitly followed the economic axiom that says when supply is high, demand is low. For your home to be in demand and ultimately sold, it must priced at the low end of the supply.
END
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