How Do Realtors Get Paid?

First of all, in Florida, there are two general types of real estate licenses: sales associate’s license and broker’s license.  There are further divisions (active, inactive), but for now, those are the two general types.  In order to get a broker’s license, an individual must have had a sales associate’s license for at least two years (it used to be only one).  A person with a sales associate’s license must operate under the license of a broker, or as we say, “hang” their license with a brokerage.  A person with a broker’s license can continue to work under another broker’s license, and in this instance, they are a Broker Associate.  Alternatively, a person with a broker’s license can operate their own office.  All real estate offices must have a designated broker.  There can be co-owners of an office, with at least one owner being a licensed broker – not all owners have to be brokers (they can be a licensed sales associate), but the office must have a designated broker.  In most instances, a Realtor who is working under a broker is acting as an independent contractor, not as a salaried employee or hourly wage earner.  This means that there are no 401k’s, no paid vacation, no sick leave, and no assistance with health insurance, etc. that many people associate with being employed.

When you contact a Realtor to sell your property, which means a market analysis, determination of price, recommendations on presenting the home, marketing, showings, signage and lockbox, open houses, going through offers, home inspections, dealing with appraisals, lenders, etc., a process that often takes months, they do NOT get paid during that process.  And if your house doesn’t sell during that listing period with that Realtor, they get nothing.  Not one thin dime.  They do not get reimbursed for any of their expenses unless you have agreed in the listing contract otherwise.  Thus why Realtors, in most cases, will not take overpriced listings.  Why invest all the time and work into a property that won’t sell with a list price like that?  If your property does sell, if your Realtor is a broker, they are paid at closing when the checks are distributed.  If your Realtor is a sales associate or broker associate, their broker is getting paid at closing; they are paid afterwards by their broker.

If you contact a Realtor to show you property, they do not get paid for researching available properties and comparable properties, making appointments, driving around to and showing multiple properties, drafting offers, presenting offers, determining when a reputable home inspector is available, dealing with the mortgage lender, appraiser, surveyor, etc.  They will get paid at closing if the Realtor is a broker.  If the Realtor is an associate, they get paid by their broker after the closing.  Therefore, if you decide you need to switch agents after enlisting the help of a Realtor who has done more than show you a property, be sure it is for a really good, valid reason.  After all, that agent has been working for free.

The commission split between broker and associate is widely variable.  In both cases, out of whatever the Realtor gets paid, they are paying for office expenses, income taxes, gas, advertising, etc. out of their pay and have to find a way to put something aside for retirement and lulls in the real estate market (if they are thinking ahead).  Remember, until the closing is done, your Realtor is operating strictly on good faith.  They work for free until the closing is done, and that is basically how Realtors are paid.

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To The Person Who Wants to Look at Property

Six days ago, a Realtor in the Little Rock, Arkansas area went to show a property to a prospective buyer.  She had told her husband she was excited about this showing, as the person was claiming to be a cash buyer – no mortgage process involved, which we Realtors love.  It takes what can be a messy process (getting a mortgage) out of the equation.  The showing was scheduled for 5:30 p.m. on a Thursday, and when 8:00 rolled around on that day, her husband felt something wasn’t right.  He went to the property, and there was her vehicle with her purse inside.  He went into the house to look for her, and there was no sign of her.  She had disappeared.

A suspect in her kidnapping was identified (taken into custody a few days later), searches were being performed by hundreds, everyone held hope that she would be found alive, prayers were uttered by many, including thousands of other Realtors across the country.  Sadly, the Tuesday morning following her disappearance, Beverly Carter’s body was found in a shallow grave about 30 minutes away from the property she was hoping to sell to a cash buyer.  When the suspect was asked by a reporter “Why Beverly?” his answer was “Because she was a woman who worked alone, a rich broker.”  This is simply heartbreaking and sickening.

Acts of violence have been perpetrated against Realtors from time to time for as long as I can remember – I have been a Realtor for the past 24 years.  We have heard the safety instructions, not necessarily followed to the letter.  All of us, at some point, have made the decision to go meet a stranger at a house because we thought the prospect of the sale sounded pretty good based on a conversation over the phone (or, God forbid, an email).  One good thing about being in the business for a long time is that I can work largely through referrals instead of chasing flimsy leads that involve people I don’t know or who haven’t been referred to me by someone I know.  Not all trying to earn a living doing this have that luxury.

My message to the consumer who wants to look at property is this:

1) Expect to provide information about yourself and to have to make an appointment ahead of time.  Do not be annoyed when the Realtor you call will not drop whatever they are doing instantaneously to go show you a property.  The request that the appointment be made ahead of time so ALL parties (including sellers) can be adequately prepared is a sign of a trained professional.  This can involve looking into YOU and your background.

2) Expect to have proof through a third party that you are financially qualified with someone the Realtor can verify this with.  Do not be annoyed when the Realtor you call will not show property to a prospect who has not been financially qualified through a local loan officer, and if you are a cash buyer, to have your funds verified through a local bank that the Realtor is familiar with.  A person who refuses to have their finances verified is a red flag – a Realtor should NEVER show property to a stranger refusing to get pre qualified (including having a credit report pulled) with a local lender.

3) If the policy of the Realtor’s office is that you must come to their office and present a valid photo ID that the office makes a copy of before one of their agents will show you a property, respect that their safety is an important matter to them.  If that was a member of your family, would you want precautions to be taken on their behalf?

4) If the Realtor is meeting you at a property and has not met you before, they may take a picture of your license plate and send it to their office or their spouse, they may be on the phone with a person they check in with and instruct that person to call them back in 5 or 10 minutes, or simply keep the phone on while showing you the property, they may (especially if the property is vacant) get the door open for you and ask you to go in and look around on your own, and will see you when you come back out.  In no instance should a Realtor ever enter a room or house before the unfamiliar prospect does – this is a basic safety rule.  They may keep pepper spray in their hand or have a firearm on them, particularly if the property is in a rural area.  They may bring someone else with them (although there have been cases of two persons being assaulted, robbed, raped, killed by an assailant during a property showing).  The Realtor who is keen about their safety will have parked their car in such a way that they cannot be blocked in by another vehicle.  Please understand that no matter how nice a person you are, the Realtor does not know you and has every right to put their personal safety ahead of all else.

5) If you are coming from out of town, make arrangements ahead of time by having a Realtor you know where you live, do some research and find a Realtor suitable for you in the area you are going to.  They can contact this Realtor, putting the parties together in a professional and safe way.  This way, the new Realtor you work with has been doing research on properties suitable for you, has gotten you in touch with a mortgage lender (and you have gotten prequalified), has made arrangements for property viewings, and has a familiarity with you that makes things far easier than if you were to just show up and call them out of the clear blue sky.

Realtors love working with people, but there is no possible commission that is worth us putting ourselves at risk, and possibly losing our lives.  While we want to inherently trust people, we also have to have a healthy awareness of what can be a dangerous situation.  Your patience and understanding in this matter is greatly appreciated.  I know Beverly’s family wish that safety precautions had been taken last Thursday, but she did exactly what so many of us do without a lot of thought.  Perhaps more of us will be cautious now, and hopefully, house hunting consumers will understand and tolerate the measures that we must take if we hope to not become crime victims.

Prep to Sell Your Home – Part 3

Part 3:  The Interior: Declutter, Neutralize, and Clean.

Declutter- This is the first step and will help with the rest of putting the inside of your house in show ready condition.  Think of this as packing for your move.  Collections and knick knacks are the stuff of the American lifestyle, but we want prospective buyers to look at your house, not your personal items.  This is the instance where the saying “Less is more,” holds absolutely true.  Fireplace mantles, end and coffee tables, bookcases and counter tops are places where most of us have far more stuff there than we should.  Get some boxes and packing paper, and pack the stuff up.  Paying for off-site storage will help you get the items out.  Also, extra pieces of furniture should go into storage (and if you are not going to use this stuff again, have a garage or yard sale or donate your items to charity).  It is extra furniture if it is obstructing the flow of foot traffic from one area to another.  When it comes to kitchen and bathroom counter tops, have as little as possible out.  Personal toiletries of any kind should be put away in a drawer or cabinet – not left on the counter.  Bottles in the shower or tub area should only be what you would use in one bathing session, not a vast collection.  What is left on the kitchen counter should be the appliances that you use daily and perhaps a decorative focal point in a corner (glass container of lemons, cookbook on a stand are common staging items in kitchens).  The more “stuff” that is put away and out of site, the better.  Very personal items (think family pictures) should be packed up.  If you have walls full of multiple items, remove them and leave a single piece of artwork on the wall.  In some cases, 3 items may work better than one, but you should have no more than that.  Your property will be a lot easier to keep clean for showings when there is a lot less stuff and just show better. Neutralize-  Now that we have gotten beyond the stuff and cleared a lot of it out, now is the time to ask yourself “Can prospective buyers picture their own belongings in this property?”.  Do you have rooms with really interesting wall colors or floor coverings that are an outdated color?  There is no better friend to the property seller than paint (good quality – not cheap).  I recommend an eggshell or satin for interior walls with a primer included in the paint.  This is so the old paint color will not bleed through, although if you are covering a really dark or bright paint, it can easily take 3 coats to cover it.  If you have wallpaper, get rid of it.  Nobody wants wallpaper anymore – this is why you don’t see it in new homes.  You are best off removing it and painting the room (don’t paint over wallpaper – buyers will see that and consider it more work for them to do).  I know, sometimes you see decorators use it on HGTV, but they are trying to be “creative” and “artistic”.  Preparing your property to sell is not the time for that.  Pops of color in a room are great and can lend itself to good looking staging, but do the colors in small items, like throw pillows.  Rather than use a stark white, use something that would be considered earth tone, mellow and not in-your-face.  Taupes have been popular, cream or beige tones often work well, earth tone mellow greens have been popular, grays have recently gotten popular (watch out for going too dark).  White on trim work is classic and crisp – I like a semi-gloss ultra white for trim.  Painting is not difficult and can be done by a seller, but if you really don’t have the skill, get a friend who knows how to paint to show you the ropes or pay someone to do it right.  Nothing is worse than having to go back and re-do work that was done incorrectly.  Flooring – if it is carpet that is a strange color or just worn out and nasty or mismatched all over the house, change it.  Currently, people favor non-carpeted surfaces, particularly in living areas, so you may need to consider something other than carpet.  Have one type of flooring throughout living areas and carpet that matches if it is in bedrooms.  You want someone to pay top dollar for the place, so putting some money into selling it may be crucial to it selling, and selling for as much as possible.  Same can be said for interesting or worn counter tops. Clean-  Buyers are picky!  We live with little things that we ignore, but having a home super clean, especially kitchen and bathrooms, is more important than ever when your house is on the market.  Remember, you are in competition with other sellers to get a buyer to make a good offer on your home.  The cleanliness of your home can make the difference between no offer at all, an unacceptably low offer or a good offer.  The idea of going top to bottom is a good one here.  Start at the top of the rooms by clearing off any cobwebs that you didn’t notice before, then clean off ceiling fans and light fixtures (think dust and dead bugs).  Next, a good dusting, including chair railings and baseboards, and then floors.  If the carpeting has stains, get a professional carpet cleaning service in to do a good job on it (the do-it-yourself cleaners are not as good).  Bathroom fixtures and tile should really shine.  Kitchen sink, counters, cabinets, and appliances should be free of food residue.  Lastly, you don’t want to forget the windows.  Now the challenge will be keeping it clean! So, with the outside and inside of your home ready to have photographs taken and ready to show, all you need to do now is have your Realtor set up the marketing, have it priced right for the market, and be ready for the buyers to come looking! Prep right, price right, and you will sell right.  Cheers, n.

Prep to Sell Your Home – Part 2

Part 2:  The Pre-List Home Inspection – Why should I have one?

Home Inspections – we have all heard of them by now.  There was a time in the not-so-distant past when home inspections were unheard of or very rare, but they are now standard operating procedure in the process of buying a home.  But what about getting one in the process of selling a home?  In nearly all cases, this Realtor would consider it a good and prudent item to make part of the home selling process, and here are some reasons why:

1) Your house isn’t perfect.  Really?  Yes, that is correct.  In our day-to-day existence, we are not necessarily closely examining or paying attention to every little thing – we often live with much of it and just consider it a “quirk,”  and if you don’t mind, why should a buyer?  Because they are the buyer, and they will care.  What is a minor annoyance to you could be something that is scary to them (especially if they are first time home buyers), or worse, actually a symptom of something more significant being wrong.  Why not clear that up ahead of time?

2) Because you do not know your house as well as you think you do – almost NONE of us do.  You aren’t generally skulking around in your attic,crawl space or on your roof.  Most of us are not routinely checking wiring, plumbing (including septic tank/drain field), the heating and air, other mechanical systems of our homes, and structural integrity issues.  Unless you are a general contractor or professional home inspector, you are not qualified to do so (and then even further licensed in specialized areas), so hire a recommended home inspector to check out everything for you before your home goes on the market.

3) You have time before your home goes on the market to address any potential “deal killers”.  If the inspector finds an item that is a major issue, you will be able to get it addressed, know that you have had to spend this money (so you don’t enter into a sales contract at a very low price and then find you have a really expensive repair that must be done – you will know what money you have in to preparing your house to sell), and be able to have your Realtor advertise that the home has this new component, such as a new roof, encapsulated crawl space, new wiring, new plumbing, or radon mitigation system.

4) A pre-list home inspection is a measure of assurance to prospective buyers.  This is especially true in the case of selling an older home.  Have the inspection report available for buyers to see, along with any receipts from repairs that you have had done as a result of the inspection.  If there are issues that you do not have the financial resources to address, then you can have an estimate for that issue included and plainly state up front that that item is “As-is”.  

5) It will help you price your property correctly.  If the house needs major components that you are unable or unwilling to deal with before selling it, then you can account for this in the pricing of the home and state that up front.

6) It makes full disclosure of the condition of your property possible, and full disclosure is an important matter. The effort you take to fully disclose issues of your home may possibly help you to avoid troubles after the sale.  Reference Johnson v. Davis.  Sometimes it can be not what you did know, but what you should have known.

The only instance in which I can think of where a pre-list home inspection isn’t compelling is one in which the home has been purchased within the last couple of years and you have a home inspection report from that time to let prospective buyers view.  Still, if you have any component of your home that requires regular maintenance with a licensed professional, be sure to have whatever that is checked by the qualified service person prior to listing your home.

Prep right, price right, and you will sell right.  Cheers, n.

Prep Your Home to Sell, Part 1

Part 1:  The Outside of your home and the always important curb appeal factor.

When a prospective buyer sees a picture of your home on the internet (most buyers first see their eventual homes on the internet these days) or drives by your home, what they see on the outside will often determine whether they make that phone call to their Realtor saying “Tell me more and when can I see it?” or not.  If you would like to sell, of course you want to be in the category of houses that buyers want to see, right?  So let’s get the outside looking good.

Put away recreational and yard equipment and make sure there is a clear path to the front door.  Left out hoses, bicycles, etc. give a disheveled, unkempt appearance right off the bat and obstructions in getting to the front door do not say “welcome”.

Trim back shrubbery and tree branches.  Shrubs should be no higher than the lowest point of the front windows (Crimewatch suggests this as well) and greenery should not be up against siding.  You want them to be able to see the house and let in natural light, as well as giving your property that neat and well-kept appearance.

Pull the weeds and lay a fresh layer of mulch – fresh pine straw or bark mulch defines the landscaping beds and helps keep the weeds at bay.

Check trim and siding, if applicable, for rot and have any repaired and repainted.

Put a fresh coat of paint on the front door and if any hardware is monogrammed, engraved, or in poor condition, remove it and replace it with something new.

Have the exterior washed.  Don’t forget a soft wash of the roof if there are mildew stains, the driveway, and walkway.

A colorful potted plant or two by the front door are a nice touch.

Keep the grass mowed.  This sounds very simple, but I am amazed by how frequently I show properties on the market where the lawn is forlorn and neglected looking!  If you are not at your property that is on the market, be sure you hire someone to maintain the yard.  Not doing so will cost you money in the form of a lower selling price or no sale at all!

Prep right, price right, and you will sell right.  Cheers, n.