Buyers LOVE seeing tons of photos for each listing online. I think Realtor.com said that listings with multiple photos get seen 6 times more than listings with 1 photo. The tendency for buyers is to see a photoless house and think it is garbage and skip to the next listing, when in fact it might just be a sucky listing agent or a foreclosure with an underpaid agent. (see the Arlington foreclosure Megan bought, it had no extra photos and she almost skipped it)

I’ve vented previously about Sucky Listing Agents that use free “drive-by” high school photographers to post one default photos on the MLS. Well sucky listing agents are GOOD for buyers!

Fewer photos= Fewer showings=Fewer buyers= LOWER PRICE!

Therefore, DO NOT skip photoless listings. I know it is a pain (also a pain for the buyer agent, which should be making a photo album for each viewing), but take the extra effort and potentially save $15,000.

I painstakingly reviewed 268 Sold listings in Fairfax since 5/1/07 from $400k to $500k.

24% had NO ADDITIONAL PHOTOS!

This is embarrassing! Also note that 57% of FORECLOSURES, Bank Owned, REOs etc had no extra photos.

Only 12% of agents posted the maximum 20 photos. This amazes me (FranklyRealty.com Requires All 20). Note that the local MLS just went to 30 photos, and now they are free. So if the $12 was too much for your agent, now they have no excuse.

I also found listings with more photos sold faster (duh). Here are the photos to Days on Market (DOM, not the champagne) analysis:

• 1 Photo = 70 DOM Avg
• 6 Photos =40 DOM
• 16-19 = 36 DOM
• 20 MAX= 32 DOM

The Closed NET Price as a % of the Original Price also showed a direct correlation.

I scrubbed the data to find the REAL Original price. I manually adjusted the 20% of listings that were relisted (see my best of 2006 blog on MLS DOM data fudging), and I adjusted for seller subsidy.

Listings with fewer photos sold for less.

• 1 Photo= 91.2% of Original Price
• 6 Or more= 95% of Original Price

Therefore on a $400,000 home, Photoless listing sells for 3.8% LESS.
(Now one can argue that a sucky listing agent also might suck at proper pricing, but come on, you get the point)

Bottom line for Buyer: Just like I’ve said staging gets you MORE $ for your listing, the opposite is true for buyers. Buy unstaged homes (see Don’t Buy Staged Homes) when you can and consider the poorly marketed homes to get a better deal.

Bottom line for Sellers: Duh, at the very least, make sure your agent puts a ton of photos.

Bottom line for Agents: Keep up the bad work, it makes me look better.

Share this blog post with a friend. Make sure to sign up for this blog (upper right of the page Blog.FranklyRealty.com) as next week I’ll show more of the data and how Days on the Market correlates to price. Also more on DOM-M vs DOM-P Relisting tricks.

- Written By Frank Borges LL0SA Broker FranklyRealty.com

Please report typos!

So you no longer believe the “Buy Now!” campaign from the National Association of Realtors. Especially since The New York Times quotes the former Chief Economist David Lereah as acknowledging he had gotten it wrong. Also you no longer hear the office water cooler chat: “Historically with a 7% annual appreciation, you can’t go wrong” or “stop throwing money out the window” (see my “Don’t Buy, Ask Why” video/blog).

The market has been dropping over the last two years. Poorly, I mean “badly” (especially condos). In the newish building where I live (Clarendon 1021, an Arlington Condo in Virginia), one particular unit went from $585,000 starting price, up to $670,000, and then down to $530,000 in a pre-foreclosure last month. A lugubrious $140,000 swing! So it would make sense that people would ask me “is this the bottom, should I buy now?” and today’s “So there are some real deals out there?”

I can understand the fear that a prospective home buyer has in this marketplace. Nobody wants to be made the fool that bought at the top. Even knowing that they got the place for $50k or $100k better than a topper (a made up word for somebody that bought at the top), isn’t good enough. They want the exact inflection point. They want to be the braggart of the officeplace in a year or two when they are “rich.”

I call these people Market Timers.

Enough already? When EXACTLY is the right time to buy…?

The day, as in the exact day is… the day you stop caring about the bottom of the market and you decide you are ready to live in a place for 5-10+ years and enjoy life.

I’m serious. It might sound like a convenient way for yet another Realtor to make “now” always the best time to buy, but show me one other blog that will also tell you that the economics of buying are still WAY off, and might be for many years to come. The economics of renting are still far far better than buying, even after the tax advantages.

I’ve always maintained that your house should be #1 about enjoying life and all the “warm and fuzzies” that come with home ownership, and maybe #4 can be about investment. Those that try to make them both #1 will have an analysis paralysis situation.

Nobody knows what the market will do (see Stockbrokers Can’t Predict Stocks, Realtors Can’t Either!), so quit trying to be Nostradamus (or expecting me to be one), and go out there (when YOU are ready) and try and get the best price possible and enjoy!

My next article will be about Pre-foreclosures, short sales and bank owned properties. If you like what you are hearing, make sure you sign up for this blog via Feedblitz on the right side.

- Written by Frank Borges LL0SA- Broker FranklyRealty.com

p.s. Typos, please report them to me.

p.s.s. For those that really wanted some “timing,” all I can say is December is when there are the fewest # of buyers, and you might get another 1-3% off. Come Jan 2nd there is a FLOOD** of new buyers that have put the holiday stresses behind them, and are eager to buy. The problem with waiting until Dec is the inventory and your options are the lowest.

Correction: A commenter called me out on the use of “FLOOD”, that was probably too strong of a word. I ran the numbers and actually January had 40% more under contracts than November and only 20% more than December for 22201. So maybe I should have said a “smidgen more.” See comments for more details.

For the most part I don’t really believe in the idea of a “Good Deal” (see post Buyer’s Market?” No Such Thing As a “Good Deal” ), but you can get a better deal if you are open to being flexible and buying with your mind (and agent) and not with emotions.

Too often I find buyers that want an aggressively low price, but then they fall in love with one place and they fold their cards rather quickly.

Reintroducing the non-patent pending “Round Robin” buying approach that I initially touched upon on 1/5/07 Tip #1 From Mom: Don’t Trust Realtors That “Sell” You On Buying.

I learned from my mother that you never know the situation or needs of the seller. Some might be pressed to sell quickly for they fear the market is getting worse, or are approaching a foreclosure. Meanwhile others might have the mentality of “If I don’t get what I want, I’ll just rent.”

How do you know which is which? Ask them (indirectly), one by one.

Round Robin System

1. Be flexible. Find two or three homes that you like. Don’t think in terms of whether you like them at X price, think in terms of “I’d prefer house #1, but I’d consider ABC if it was $X off”
2. Put in ONE offer. Let that agent know that you have 2 or 3 properties and you would like to first offer on their property. (Ethically you can only put in one offer at a time. Even if you have “outs,” your contract has to expire or be countered (a counter nullifies the initial offer) before you can move on.)
3. Review counter or accepted contract. The seller can a) accept, b) reject or c) counter. If the counter is something you want to work with, keep it alive. Otherwise
4. Move one, offer elsewhere. The negotiation isn’t over, but you tell the listing agent that you will now offer on another property. And since your client can’t make two open offers, the listing agent is still invited to re-submit. I like to end with a “we may or may not come back in a few days if the other houses don’t work out.”Sidenote: Why would I reveal my strategies? A listing agent might be reading… GREAT! Then they know I’m serious when I say we are offering elsewhere and may or may not come back.
5. Repeat as necessary (are you really supposed to “shampoo, rinse and repeat?”) with a slightly higher price, until somebody bites.

Again, this technique isn’t for everyone. It might sound sexy to be aggressive and all your officemates might talk about “lowballing” and nobody wants to overpay, but if you want that extra $5k- $25k, be prepared to spend $5 on some sleep meds.

Love to get your comments. Do you do this? Do your clients have the stomach for it? Do you consider it unethical?

– Written by Frank Borges LL0SA- Broker/Owner FranklyRealty.com
703-827-4OO6 Please report all typos, I don’t like looking stupid. If you like this post, sign up for new blogs daily, use the form on the right of the page. Keywords: Negotiate, low-ball, purchase agreement, contract, offer, buying strategies

How about the bastard cousin: “If you hurry up, expect to wait.”? Not as catchy?

Anyhow, the fastest way to sell a house is to slooooooow doooooooown and do it right from the beginning. A rushed job will NET you less and take 3 times longer to sell.

A month ago I was contacted by a seller that wanted their house on the MLS tomorrow!

In one day! Could I have done it? Could I have thrown it up on the MLS? Sure, but it would look like throw up, and that doesn’t sell… slowly. And no you can’t just put it up quickly and make it better later (I’ll explain later). So, I had to send her elsewhere…

Time and time again, the seller wants to have it sold yesterday. I don’t blame you! The process is pretty stressful, and the faster you can unload the property, the better, right? Here is where the counterintuitive part kicks in… you sell it FASTER if you give your agent, stager, and sometimes painters and photographers the proper amount of time to get everything done perfectly straight out of the gate.

• Put all of your efforts behind the first weekend LAUNCH!

The best way to sell a place is to have 2 offers. Yeah, maybe a bidding war will occur, but I’m talking about getting that extra nudge to make 1 of the 2 interested parties put in an offer.

The best way to do that is to:

a) have a delicious product.

b) compress most of your efforts into the first “launch” of your product.

Microsoft doesn’t release a new big software and THEN advertise slowly. They are like a fireworks display in reverse. They start with the grand finale. They have a HUGE media blitz up front. You need that for your home. (this is also one of the reasons why it hurts you to “try it” FSBO for a couple of weeks, you deflate the parade, read: Go FSBO! Save $20,000! Realtor Tells All!)

• List EXACTLY on Wednesday night or Thursday.

If your Realtor says “so when you think you wanna have your listing thingy up?” Please fire them and go to the phonebook and pick the first alphabetically listed agent, chances are, they will be better.

Why Wed/Thur? Email alerts for new listings are automatically sent around midnight to home buyers that have signed up through various MLS searching services. If you list on Friday at noon, everyone getting alerts at work will see them on Monday. After your “weekend launch!” If you list on Monday, the lead time is too long before the exciting weekend. You might have some interested parties, but why not compress the interest to a few days and make your house seem more appealing? Also sometimes you can kill your chances for a bidding war as those fast buyers tend to give Thursday deadlines, before the weekend push. So yes, given the choice to rush a listing in on Sat, versus waiting until the following Wed, I think waiting will sell your house faster! (Ok, maybe I’m a little too into the psychological science of selling, but I have seen it work)

Here are some made up stats of mine:

• 80% of your visitors will see your place in the first 10 days.

At any point in time there are a certain number of buyers waiting on the sidelines for a home to go on the MLS in a certain zip code. They have MLS email alerts set up. Once it hits, that backlog of buyers will see your house within the first 10 days. These are the best buyers since they probably have been looking for a while and are ready to act on the perfect house.

After those 10 days, traffic will tank. You might first blame the agent thinking that they have slowed down their marketing efforts, but that probably isn’t the case. Now you have to to wait for newcomers into the market. And the longer it sits, the higher the chances it will sit even longer!

• You only get 1 chance to impress!

If you throw up the listing and it has no photos, only a couple of photos, ugly photos, unstaged photos, the potential buyers will see your place and hit the delete button. Maybe only to reconsider you again when the next alert hits, your price drop (alerts are sent out for new listings and price drops).

• Sidetip: Never list “freshly painted” in your remarks.

Also people don’t like places that appear fixed up just for the sale. Why would you highlight “this place used to be a dump and a rental.” Instead, just let them come in and in their mind think “wow the former owner was meticulous.” Which scenario gives you a better warm and fuzzy? A good agent and stager will manipulate that feeling to the seller’s benefit. (all part of our master plan)

• Staging takes time! (see Bidding Wars? It’s The Staging Stupid!!)

While I used to think staging was swinging past Target and picking up $100 worth of junk and plastic flowers, it is so much more (and now I’m learning that there is a huge difference between a 2-day certified “stager” and a design degreed professional. It makes a difference, that difference nets you more. Blog coming soon.). Actually we recommend taking staging a step further and oftentimes undergoing light construction and repainting. Each house is different, but it takes time to do it right. Expecting designers to work their magic in one day would overflow mental institutions across America!

It takes some time to get things down right. Maybe a week, maybe two weeks or more, if we need to coordinate a team of workers to work on your house. Maybe one day there will be a drive through MLS service that can get the stager out to the house within the first hour, and the construction crew out by hour 3 and photography etc etc. (Sounds like a reality show to me: “Ready to Sell in 4 hours!”)

Oh and that seller that wanted the “rush job,” her place is still for sale, and she has already dropped her price $10,000.

Bottom line is, we understand that you want to sell it as fast as possible, but lets take a moment, breathe and do it RIGHT, Not RIGHT NOW! And net you more, and faster!

- Written by Frank Borges LL0SA- Broker/ Realtor FranklyRealty.com

America was lured in by the… 20 year long regurgitated story “Attack on the 6% Realtors” and comments about “saving thousands.”

After watching such a biased infomercial, of course Redfin seems like a no-brainer. Well my blog readers have a brain, so here it goes…

Sidenote: Normally I’m not a fan of NAR, but I did agree with most of their comebacks (click to see).

I have written extensively on my bias opinion on the pros and cons of rebating and discounting including:

• For Buyers: Realtor Rebates. Free Money or Expensive Savings?
• For Sellers: Go FSBO! Save $20,000! Realtor Tells All!!

I would like to focus on the “savings” comment put forth by 60 Minutes’ case study.

“WE SAVED $27,000″* NOTE THE ASTERISK!

After they were done laughing and giggling on their couch about how they saved $27,000 and how they could spend it on their wedding, they made an under-the-breathe comment that they sold their place for…

“$10,000 under what Redfin recommended that we list it for.”

In this comment I see two things to question:

1) “$10,000 Under List”

2) “The list price recommended by Redfin.”

So let’s start with the latter…

If some of their agents do as many as 8 closings a week, might it be remotely possible that they might have a strategy of listing low in order to sell fast? I’m not saying they do, but would that make sense to anybody besides me?

And for the “$10,000 under list,” while I oftentimes say that “Many Listing Agents Suck” See RealtyTimes article or my blog, one has to wonder if another motivated agent that had more time to devote to the listing might have:

1. Landed them full list ($10,000 higher)
2. Started higher and ended higher ($15,000+ higher)
3. Got a bidding war going, resulting in a much higher net ($32,000 like our Realtor Megan’s listing, see blog).

In my biased opinion, the best way to get the most for the house isn’t to find one buyer, but to find at least TWO buyers. I don’t believe in pricing low to start a bidding war, but I do believe in getting as many buyers into the process as possible. A process that can take an extra 8 hours in one day for one agent, while netting the client another $32,000.

Back to the “$27,000 total in savings,” that was for buying and selling. If we assume that they bought a bigger place, they probably “saved” $12,000 on the listing and “saved” $15,000 on the purchase.

I’m confident, and I have references to back me on this, that I can consistently do at least $12,000 higher than a discount agent. I wish there was a way to prove this with statistics, but they would just be manipulated.

Instead I can only give real world examples:

1. Megan, with FranklyRealty.com, had a recent listing (See Bidding Wars? It’s The Staging Stupid!) The initial discussion regarding the starting price at the listing appointment was roughly $550,000 (seller’s opinion). After staging, light remodeling and further research, and many hours of work, the starting price was set aggressively at $570,000. The end result was 3 offers and a ratified contract $13,000 higher. While I’m confident in these number being an example of hard work, Redfin might also find an example of an agent that did a similar great job. And if that person was so great… I would hire them and pay them double, because they are worth it. (think about that for a second, if you could offer value way beyond discounting, wouldn’t you start charging accordingly?) 

   Sidenote: ZipRealty, another discount firm (some disagree with that term, see blog comments/debate), according to one blog is full of disgruntled, newer, and underpaid agents that are overworked. External blog: What’s Wrong with zipRealty

    

2. FranklyRealty.com Saves Client $152,000 should be the next 60 minutes update.

The above is actually a true story. It was a hot seller’s market, and with proper marketing and about 10 stressful non-stop hours the $499,000 listing was bid up to $601,000. One thing is to bid it up, another is to actually close at this price. Especially after several attempts to renegotiate, and appraisal issues. Yeah sure, I got a few bucks for the incremental difference, but that is nothing compared to the unexpected $102,000 in their pockets. Sure they could have “saved” and sold it fast FSBO, but they wouldn’t have been able to get anything near wha
t I got them (their words).

Then on their purchase, they loved a house that was getting 8 offers. At FranklyRealty.com we don’t write normal looking offers, and that sets us apart immediately. Each offer is different. I can’t publish all my tricks here, but when was the last time that you saw a contract that put the Realtor’s ENTIRE commission on the line as a promise that we wouldn’t renegotiate the offer? That is powerful. Also we run a CRA ™ Comparative Realtor Analysis report (see it here on RealtyTimes.com) amongst many other systems that net our client more.

A good agent should approach buying a house like an acquisition of a company. Thus winning contracts for less. In this case the 8 offers were bid up to approximately $800,000. Why in the world would somebody take our lower offer? Well because money is not the only motivating factor. When we got that house for only $750,000 my clients were in shock after just getting approved by the lender to get bid up to $800,000. They saved $50,000.

So it doesn’t matter if the market is hot, cold or you are buying or selling, an aggressive agent can save you much more, and do it in a way that all parties are smiling in the end.

Ok, I got sidetracked. The point is that what a great agent does can’t be compressed into 8 closings a week per agent.

So you have to pick one:

1. “save on commission” or
   
2. “net more.”

Bottom line is,

I used to rebate… but then I got… good.

Frank Borges LL0SA- Virginia Broker/ Owner FranklyRealty.com

Blog.FranklyRealty.com Featured in BusinessWeek, CNBC, WSJ etc.

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Why in the world would you sign this?

How could signing all your rights away ever help you, the buyer? Where is the “What’s in it for me?” in that proposition?

Don’t you still want to be able to:

• Use another Realtor if you don’t like this one?
• Buy a FSBO and have no commission be paid!
• Bypass the buyer agent and make the listing agent give me the commission?
• Walk into a New Construction and sign papers, who needs a Realtor for that? I got them down $50k!
• Have 2 or 3 eager Realtors compete for your business. Each one working their tail off to find you that hidden gem. Doesn’t cost you anything, so why not? (just like the Double Agents show, where 2 Realtors compete: see Video)
• If you find the home, why should he get paid anything?
• Why sign an “exclusive” agreement, when you can sign a “non-exclusive” agreement?

And that sales pitch is so hoaky sometimes:

• “My broker requires it before showing you anything.”
• “This is standard.”
• “If you don’t sign this, then I am legally working for the seller. If you sign this, it acknowledges that I am working for you, the buyer.” (my favorite, as the law reads, it is true, but in reality, it is just a pitch)

What a ton of B.S.

So let me know if I missed anything. All of the above is the typical viewpoint of the buyer right? I know it well. I grew up with it. My mother was the most cynical person and would never sign one of these agreements. She didn’t see the “how can this help me.” In part it is the Realtor’s fault for not explaining the process clearly.

But, and here is the big butt, I have seen the other side! It isn’t always as shady as it initially appears and it can help the buyer.

As a Realtor, many newbies feel bad getting their clients to sign these contracts. Sometimes they let it slide, until one day they understand why it protects the Realtor. Then I’ll go into how it helps the client.
What? This exclusive contract can help the buyer? How in the world is this going to come around full circle? Ah, the suspense.

• Background story: I was helping some clients buy a home in 2004. Many buyers might think we are paper pushers, but some of us Realtors go above and beyond. Including once driving to Chantilly to take 100+ photos of the interior of one unit. Why? Because of Sucky Listing Agents. The agent only had 1 photo, and the buyer was out of town, so I created a virtual experience for them. (I do this for all of my buyers, I take about 50-100 photos of EACH place we see together and I create on online private album for them to remember everything. Does your B.A. do this?)Anyhow, we put an offer in on one place. We didn’t get it. I’m ok with that. I could have talked them into a higher price, and won, but I didn’t do that. I worked for their best interest, not mine. Then they found a For Sale By Owner. It was literally 20% overpriced (as many FSBOs are). They had me run the numbers and do a full analysis on the neighborhood etc. I even helped them talk through what they wanted to offer. I warned them no matter how upgraded it was, it was a really high price. It was like buying the best house in the worst neighborhood. They decided to offer anyhow.

  I then get an email the next day saying that my services were no longer needed (You’re fired), they had bypassed me and bought the FSBO for $30k over what it should go for. Payment to Frank was $0, (hours wasted). Buyer overpaid $30k. Having some consolation knowing they overpaid= Priceless.

Since then I require my clients to sign an “Exclusive Buyer Agency Agreement” early on. Not before the first showing, like some, but shortly thereafter. I give them enough time to feel me out, but I can’t invest a ton of time with a customer that is still shopping around agents and might bolt at any moment. A catch 22 of sorts.

So, ok, you got screwed, that sucks, help me understand how this helps me, today’s buyer?

1. The contract outlines what the agent gets paid. Mine says 3%. And that means if a listing is offering 2% (only a few homes do), my buyer pays the balance, and if there is a FSBO offering 0%, my buyer pays the full 3%.

Wait a second, that sucks. I’ve always been told that the “seller pays.”
Again, a sales tactic brainwash: “Buyer agents are Free.” Don’t believe that. Guess who is writing the check/loan for a $400,000 house? Guess where the Realtor fees get drawn from at closing? Correct, that check. You are indirectly paying for all the fees.

1. b. Wait it gets better. My exclusive agreement also states that if the buyer compensation exceeds 3%, the rest is rebated to the buyer! See (Shady Realtor Bonuses? 10%!! Free Cruise? Be Aware.“) Isn’t it great… no… just normal… that you have a contract that outlines what your Realtor is getting paid? Overpayments/bribes go back to the buyer, and there are no behind the scene shenanigans going on. (Buyer benefit 1: The buyer agent’s commission is fixed and you aren’t pushed into a property that bribes the agent)
2. The agent can remove the fear in the back of their head that their client will walk, and they can give unbiased advice.Come on, human nature is going to kick in. How can you ask a Realtor “What would be a good deal for this”, (a question I don’t directly answer, but that is a long story) knowing t
   hat if the buyer doesn’t buy this place, the buyer still has the right to snatch up another place and fire the agent. How can an agent be aggressive for you if their commission might drop from $10,000 to $0 if they tell you the truth and guide you through a lower bid? It just can’t happen. The agent in this situation is NOT WORKING WITH THEIR BUYER, BUT AGAINST THEIR BUYER. This does NOT help the buyer. (Buyer benefit 2: Buyer agent is working FOR the client, not competing against them).
3. Double their efforts. What Realtor in their right mind is going to go above and beyond and try to find you houses that are off the market or spend too much time on a buyer that doesn’t see the process as a team effort? I oftentimes send out letters to entire communities that my buyer likes. And that works. Usually for every 10 MLS places I show, I’ll scrounge up 1 or 2 places that are yet to be listed, withdrawns, FSBOs, or another hidden gem. Without that commitment from the buyer, I’d see it as a waste of time, or too risky. (Buyer benefit 3: More time invested in finding you more places equates to a better price or more inventory/options.)
   
4. Help you or help another committed buyer? A good buyer agent will be turning away clients, or referring to another good agent, when they get too busy. If you want a new Realtor that has nothing better to do than drive you around forever on the 50/50% chance you will use them, great, but why not use a Realtor that respects your time as well as their own time and puts his foot down and sets guidelines for the work that they perform?
   

What about non-exclusive buyer agency agreement? I heard some agents will use that. Doesn’t that help me while protecting me?

All that does is a) squelch the “I work for the seller” trick and b) outlines how the Realtor gets paid. Both good things, but knowing that the buyer might go buy something after seeing something at an Open House or a new construction without them, the bias will still be there for you to buy quickly and for a higher price.

What about New Constructions, isn’t it better if I’m Realtorless?
Almost always the price for the buyer is the same with or without a Realtor (wow a pitch that you might have heard, that is essentially true). But, yes, on a rare occasion the sales office might get a bonus if they sell a unit to you without a Realtor, but who cares? You still don’t have anybody working for your best interest. Who cares if you got them to drop $50,000, a good Realtor might be able to say “Wait, in another community across town, they have been dropping $100,000!” or “Don’t believe their comps, they are illegally not posting the seller subsidy (see Beware: New Constructions Illegally Not Disclosing Seller Subsidies). Recently I helped a client get a new construction for $10,000 under the price he was initially told was non-negotiable AND I wrote into the contract a clause that allowed him to exit the contract if the prices of the condos continued to drop (a pricing guarantee). That single handedly could save him $40,000. And all you thought we did was show up with a smile and cash our check? What about the Jaguar the money I saved you can buy? Will I get a free ride at least?

Also in one case with an Arlington new condo, is the sales office going to tell you about how the building was almost condemned and slated to be destroyed because it was sinking? Um, I don’t think so.

What about bypassing the buyer agent and making the listing agent give me the commission? Heck even Money recommended this step (see article)
From somebody that has been in over 10 national publications, (CNBC, WSJ, NYTimes etc) magazines sometime give new reports a “beat” to cover. Sometimes they are not experts and they think they can jump in and reinvent the wheel. This reporter is an idiot. When a listing agreement is signed, it is between the seller and the agent. If an offer comes in with 3% back, the buyer can’t simply void the listing agreement. The offer is netted out and the listing agent can still get their double commission. Even if they don’t still get it all, (oftentimes they do) you still have nobody representing you to help you get the best price and help you avoid all the shady Realtors tricks that are out there (DOM fudging, etc). Who cares if you “save 3%” if a good buyer’s agent might have been able to get you 5% or more?
What about these FSBOs, isn’t it better if I find one without a Buyer Agent?
Yes. In theory. But those FSBOs tend to be cheapskates. This is fine, but cheapskates (like my mother!!) are notorious for overpricing! Great you “save” on Realtor fees, but you get a horrible deal. With a Realtor who is on the same team as you, can help you evaluate the pros and cons of that unit and also strategize how you can get the seller down. No not just with a low offer, but other ways. I love dealing with FSBOs that think they know it all. My client pays the Realtor fee (wink wink) but then they get the place for $50k under true value.

Again, yes, signing the agreement might preclude you from buying a gem FSBO that is underpriced and not offering Realtor commissions. That is a “risk” that you have to understand and be willing to accept, in trade for the other benefits of having a dedicated Realtor.

Buyer’s can’t have it both ways. You can’t expect an agent to work their tail off for you, offer unbiased data analysis, and offer aggressive negotiations while the agent knows you hold an “out” card. What, is the agent expected to just cross his fingers that his time invested will work out favorably? Is it worth holding onto that out card? That is up to the buyer, and if they see any value in their agent.
To recap: I’ve put myself in the buyer’s shoes. I know where they are coming from and their hesitations. I can understand and respect that initial
viewpoint. Now put yourself in the shoes of the agent. How likely is that agent going to be to help you try and fight for an extra $5,000 or $10,000 off? Human nature would kick in and say, “Why should I be aggressive on this offer if they might just go elsewhere if this deal doesn’t happen?”

If I sign one, when should I sign it?

• Wait until you are comfortable with your agent.
• Even if the agent didn’t ask for one, consider signing one before you put in an offer. That way you are saying a) “What are you getting paid?” b) “Don’t worry, I will use you, now tell me honestly about the value of this place.”

Good luck. Hopefully after reading the rest of this blog that highlights the insider tricks of Realtors, you will better understand why this exclusive buyer agency contract is requested by some and required by others and how it ultimately helps the buyer.

Also make sure to leave a comment and read others comments.

- Written by Frank Borges LL0SA- Broker/Owner FranklyRealty.com
703-827-4OO6 Please report all typos, I don’t like looking stupid. If you like this post, sign up for new blogs daily.

Videos at YouTube.FranklyRealty.com

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Well lets talk about a huge hush hush: Realtor Rebates!

Wow, I said it, and I put it in writing. A non-Rebate firm educating their customers and readers about something that we don’t do*… REBATES.

A fellow Realtor who hates rebaters told me “You’ve got some brass ones to talk about that.”

I say thanks!

Will this be suicide for my business? Shouldn’t that be kept secret? Why tell potential clients about your competition, which might be a better deal that they didn’t know existed? Why? Because I think buyers should know about all their options, and decide what is best for them.

(*Regarding the “we don’t do Rebates” comment earlier, tell me you want to pay full price for a particular $1M home , and sure I’ll give you a rebate. But what if I can find you a neighbor’s house for $20k less?)

Rebating is not bad. It is NOT the devil, it is just another business model.

First of all, what is rebating, isn’t it illegal?
Rebating is when a Realtor gives back part of their commission to their client, the buyer. This is done above the board on the HUD1* at closing. This is 100% legal in Virginia (4 or 5 states don’t allow it, the DOJ is working on them). (*Update 5-27-08 Even though HUD wrote me specific instructions on rebates having to be on the HUD1, some companies have found a legal way around this)

Why would a Realtor be stupid enough to do this?
(others say that, I don’t agree with that comment)

Lets take the following scenario:

1. Agent #1 might get 2 deals and not rebate
2. Agent #2 uses rebating as a marketing tool and as a result might do 4 deals within the same amount of time.

Lets say each commission is $10,000.

1. Agent #1 “makes” $20,000 (* another blog will go over what they REALLY make, which is far lower)
   
2. Agent #2 brings in $40,000 but “gives” back lets say 1% of each deal (1/3rd of their commission)
   
3. Agent #2 “makes” $26,000.

Who is the dumb one? The rebater makes 30% more! That doesn’t sound too stupid to me!

Confession… When I first started I used to almost always rebate!

Why not? I was brand new, FranklyRealty.com just started (long story) and I had to find a competitive advantage. I didn’t have a good reason why the heck Joey should use me over his Mother’s cousin who has been in the business for 20 years?
Tell me what other industry doesn’t first compete on price to break into the market?

My rebating techniques got me in , and on the Discovery Channel’s Double Agents reality show. They mentioned my rebating including my “REBATE” license plate. I got a ton of deals from that. And my Internet marketing was hot. Heck, look to see who owns RebateRealtors.com and RebateAgents.com. Yeah I made less per deal, but I was doing just fine, I made it up with quantity. I was also named 2003 Northern Virginia Association of Realtors Rookie of the Year, out of 1,000 new agents, and I did that in just 6 months, even though Rookie agents were given 18 months.

Why did I stop rebating?
I kinda got good. (I’m not saying rebaters are bad). I finally had a reason why people should use me over Joey’s Mother’s cousin.

• This story was my tipping point:
  I had one client that wanted to buy a house listed at $600,000. They were ready to pay full price. I ran through my dozen proprietary how-to-price techniques (that I can’t publish in my blog, just email me for more info). I call it a CRA report (patent pending). Not a CMA, Comparative Market Analysis (which everyone does), but a CRA, Comparative Realtor Analysis. This is a background analysis of the agent’s past performance (not a bad idea heah? Imagine what else I have up my sleeve, the CRA was featured in Smart Money magazine).
  I saw that this listing agent in 5 recent listings dropped her price by $25,000 after exactly 30 days. Obviously this was how she got deals. She would convince sellers to use her because she said she could get a high price, and after 30 days would drop the price and sell it fast. So there was a good chance they would do that with this listing. With 28 days on the market we offered $30,000 under and… they took it.
  My client was super excited about the $30,000 discount, and didn’t really care that they were also getting 1/3rd
  of my commission. At that point my focus changed to helping the client save as much money possible, without having to sacrifice my pay.

So are you saying that we should or should NOT use a Rebate agent?
I’m saying you definitely SHOULD use them if you think all Realtors are just overpaid paper pushers. However if you read my entire “insider scoop” blog and see that there is more to it, you should pick the best agent, and if perhaps you find one that also rebates, good for you!

Think of it another way. They have to make money some how, right? Either they are new and need this marketing technique to get more business (ask yourself whether a new agent is going to help you negotiate a lower price vs a 20 year veteran) or they have to do a higher volume to make the same pay (they claim to be more “efficient,” and maybe they are). With that volume does any service get left out? Maybe, maybe not. Will they search for deals that are off the market? FSBOs? Recently expires? Did they send out 100 letters on your behalf to see if a particular neighborhood that you loved had potential sellers in it (yes that works with my letter)? Will they take 3 weeks to negotiate a contract with a $100,000 price drop, or will they want the deal to close fast and try to push you to close faster/higher? (Heck that can happen just as frequently with a non-discount Realtor too!)

I recently had a buyer that said “Well I have a friend’s friend that will give me 1% back if we buy with her.” I said in return, “Really, I can find somebody that might give you 1.5% back.” I had a new agent in mind that would love to make a quick $10,000, but will the buyer get the lowest net possible? In the end is that cash back worth it if the agent isn’t as good at getting you the lowest net possible or giving you the time, dedication and hand holding that you might need? I got the deal and it took 4 weeks after we found a home they liked. We offered on 2 homes, one $300k below list, and I found them 2 off the market properties from my letters. I don’t know if a rebater would have been as patient and aggressive. Maybe they would be. My clients were very happy in the end.

Lets run some numbers!
Discount firm vs. a known non-discount brandname firm!

I’m excited. What a brilliant idea! I ran an analysis comparing the negotiating abilities of one discount firm’s closings to another well known firm (not mine). What I was hoping to show was how a rebater might give you money back, but if they didn’t fight to get you that last $5k or $15k, how much do you really save with a rebater? Your NET is what should matter, right?!

But guess what?! My numbers showed that the rebating firm was a better deal! Ha! Oh no! Do I ditch my blog? Nah.

Here is what I found in my non-scientific study:

• Rebate firm closed an average 96.7% below list (including seller subsidy)
• Brandname firm closed an average 96.2% below list
• Rebate firm gives .75% back
• Rebate firm on AVERAGE did .5% “worse”,
  but with the .75% rebate, you’d be ahead by .25% or
  $1,250 on a $500k home, … on average.
• But you need to ask, what would an above average agent have been able to net you?
  
  
• Disclaimers: For those statistic majors out there, I know, I know, this is nowhere near a scientific report, just treat it as food for thought . It was hard to get a large enough sample (20 for the rebate firm and 65 for the brandname firm). Also buyers should not just be looking for the biggest discount off list. I’d rather buy a properly priced listing at full price, than get a $50k discount on a $100k overpriced home. I just used that as one way to measure a “good deal.”
  

So before you decide on your agent, whether it be a rebate agent, or another agent, make sure you read the following blogs so you know what type of agent to avoid (that is if you agree with the blogs):

1. I Need A Buyer’s Agent! But For My Car.?
2. Stockbrokers Can’t Predict Stocks, Realtors Can’t Either!
3. Leverage, The Untold Risks With Buying.
4. Tip #1 From Mom: Don’t Trust Realtors That “Sell” You On Buying.
5. Shady Realtor Bonuses? 10%!! Free Cruise? Be Aware.

Also ask yourself whether the agent you are considering will give you this type of information (including telling you about rebates) and whether they put you first or their commission first. Ultimately if they mesh with your style, great. If they also rebate, great, go for it.

And for you Realtors that hate rebaters, don’t. Get over it. It is just another business model, here to stay. Instead hate the “weekend warrior” who does 2 deals a year and is clueless. Once as a listing agent, I literally had a buyer agent say something to me that lost his client $10,000. He said “Don’t worry, I know they will
go up, they really need to get this under contract this week.” Maybe he was playing me, but I don’t think so.

Will your agent (rebate or not):

• Push you into buying. Or do they tell you the real-life downside risks with buying? (risks sub-blog)
• Expose Shady Agent Tricks. 10% buyer agent bribes, MLS fudging, etc (shady sub- blog) or will they participate and accept those legal bribes (rebater or not)
• Acquisition approach. Do they treat your purchase like an acquisition of a company? With research on all parties involved, (including once going to the courthouse to find the existing loan amount) or do they just run a CMA and tell you it is a great deal?
• CRA Reports Run a CRA report (as seen earlier in blog) or do they not even know what it is or why it would be important?
• Off Market and FSBOs. Look and find properties off the market. Lowering those darn Realtor fees can net you a better deal. But it takes 3 times the work for a Realtor.
• Willing to lose deals. Will your Realtor be as aggressive as you want and lose deals left and right until you find a seller that needs to sell at your price? (Ask them the last time they LOST a deal because they tried to get a great price. I know one agent that bragged about wining 90% of her contracts during the bidding war days. Hoorraay! Her clients probably always overpaid! Losing a deal can DOUBLE an agents time with a client, but you get a better deal when you finally get one.)
• Give you a rebate. Some will, some won’t (we don’t).
• Get you the lowest negotiated price. This is what matters (along with service).

Thanks for reading! Love to hear your comments! And remember…

- Written by Frank Borges LL0SA- Broker/Owner FranklyRealty.com
703-827-4OO6 Please report all typos, I don’t like looking stupid. If you like this post, sign up for new blogs daily.

Videos at YouTube.FranklyRealty.com

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