You've got the kitchen of your dreams and a master bedroom suite that would look right at home in a 5-star hotel. And your gorgeous new exterior paint job is the envy of the neighborhood. Your place looks so great that real estate agents are dropping off their cards telling you how much they could sell your place for, if you felt like putting it on the market.
Sell it now! Good grief no! Not after all the remodeling work. But... who knows? In five or six years when the kids are off to college and you and your mate get tired of mowing that big lawn and knocking around in a house built for five but inhabited by two, a downtown condo may look pretty inviting. Face it. At some point in the future, whether it's next year or in 20 years, you're going to want to sell your house. And with all the improvements you've made over the years, you should get a nice return on the sale, assuming you don't let your house fall apart.
Remodeling can be frustrating but it's also fun -- filled with anticipation and visible rewards at the end of the project. Maintenance is dull and routine, but you have to do it if you want to retain the value you've added to your home. For example: Hardwood floors need to be refinished every 5-10 years depending on wear and tear. If they get too worn down you can do permanent damage to the wood. Exteriors need to be repainted every 5-10 years too, depending on such factors as the weather where you live, or you can damage the exterior wood. Your roof and gutters need annual inspections. A clogged or damaged gutter and drain spout can flood your basement and cause serious damage.
And the list goes on. Like taxes and dental checkups, regular home maintenance isn't fun. But you must do it if you want to take care of what is likely your biggest single asset -- your home.
Annual checklist home maintenance checklist:
Kitchen: Check for leaks under and around the sink. Plumbing leaks can damage cabinetry and floors. Check and repair grout and caulking on tile countertops and around the sink. Also check wear and tear on wood floors, which periodically need to be refinished.
Bathrooms: Check for plumbing leaks and check grout on tiles. If the grout gets worn away water will start getting into the walls behind the bathroom, causing damage.
Basement: Check for cracks in the foundation and leaks. Buildings settle over time and even after decades of having a dry basement leaks may suddenly occur.
Attic: Check for signs of water leakage from the roof. Also look for any sign of termites or rodents. Squirrels or rats that nest in your attic can chew electrical wiring, which can lead to fires.
Smoke alarms: Batteries need to be changed annually.
Heating system: If yours has a filter, change it annually.
Air conditioning system: Change all filters monthly or as recommended by the filter manufacturer.
Roof: Note if any shingles have fallen off or if gutters or downspouts appear clogged or damaged. You can always hire a reliable roofing company to get on the roof and take a look. Reputable roofing companies won't try to sell you a new one unless you really need it. You can simply pay them for an inspection.
House exterior: If your house is wood, check that the paint hasn't worn away so much that the primer paint is showing. If the primer also wears down, you can do damage to the wood. Brick houses should be inspected for damaged bricks or masonry. Check stucco houses and repair any cracks large enough to slide a nickel into.
Asphalt and concrete driveways: Repair any cracks or buckling.
Monday, December 31, 2007
Home Equity Loans and Lines:
If you've ever asked yourself "What the heck's a HELOC," then you've come to the right place.
There are two types of home equity borrowing: home equity lines of credit and home equity loans.
A HELOC, or Home Equity Line of Credit, is the right to borrow money from a lender up to a certain amount of money. The "line" is a credit line guaranteed by your house, meaning that if you can't live up to the terms of the line, then the lender has a right (after a few nasty letters) to foreclose on your house. Typically HELOCs (pronounced HEE-lock) have floating interest rates that can change periodically.
For example, a borrower might obtain a $75,000 HELOC at "prime plus one." This means that the interest rate is one percentage point higher than the Prime Rate. If Prime is 5.5%, then the HELOC is 6.5%. Remember: The rate is tied to the Prime and could change as much as at every billing date. (The change can be dramatic; e.g., in April of 2007, the Prime Rate was 8.25 percent, whereas in June of 2003, it was 4.25 percent.) Many HELOCs today have a fixed rate feature sometimes called a "Fixed Rate Partition" that allows the borrower to lock a portion of the loan amount at a fixed rate for a period of time. This feature varies greatly between different lenders.
Who should get one: Someone who might need extra cash for home improvements, or is looking at borrowing money to buy a different house (in addition to a mortgage).
Who shouldn't: Do not use a HELOC to splurge for things like vacations or to finance other consumer debts, like credit card purchases (unless you then plan to tear those cards up!). HELOCs are guaranteed by your house, which means the stakes are very high.
Home Equity Loans are when a lender gives you a set amount of money and you pay it back over a fixed payment schedule. Typically these loans have fixed interest rates. This is a better option for someone who wants to lock in a fixed interest rate, either because they think interest rates are going to increase or because they like the certainty of knowing what their payment schedule will be.
A home equity loan also is a better option than a home equity line if you know exactly how much money you need to borrow and when you want to borrow it.
How to get one: You can get a home equity loan or line either from a mortgage broker or from a bank directly. These loans are also called "second mortgages" because they are typically obtained after the home has been purchased with a first mortgage loan.
Taxes and Interest
Are HELOCs tax deductible? Sort of. Like first mortgage interest payments, home-equity borrowing differs from credit card debt in that you can deduct the interest on your tax return. But this only applies if you itemize your deductions. Also, the tax deduction on interest is limited to loan amounts up to $100,000, with some restrictions.
What determines the interest rate? The Loan to Value Ratio and your credit score determine the interest rate of a home equity loan or line. If your credit score is excellent (760), you may be able to get an interest rate at the prime lending rate, or possibly lower. A good credit score (700 - 760) will likely get you an interest rate that is about the same as the prime rate. Poor credit will likely result in rates of 1 - 5 points higher than the prime rate. Except in some cases, you should be able to avoid fees such as application or appraisal fees, though you might get hit with an annual fee or a small "recording" fee.
The Good News
Home equity lines can be used by the borrower to pay for anything. You literally get a checkbook for the HELOC and you can write checks to your heart's content until you've maxed out the line's limit. Although HELOCs were originally designed for homeowners to pay for home improvements and other house-related projects, nowadays borrowers use home equity lines for almost anything. Most HELOCs also have online Internet access so you can pay bills online using your HELOC just like you would with a regular online checking account.
HELOCs and home equity loans can also be used as second mortgages at the time of purchase. Frequently they are the second purchase mortgage for 10, 15, or 20 percent of the purchase price when buying a home. Home buyers can avoid buying mortgage insurance (PMI) if they take out two loans instead of one, with no single loan exceeding 80 percent of the purchase price. HELOCs can fill this gap, wherein the first mortgage is frequently 80 percent of the purchase price and the HELOC is the second mortgage.
Like a credit card balance, you can pay down a HELOC at any time, without penalties.
The Not-So-Good-News
Home equity lines are serious stuff, since they're secured by your house. If you can't meet the payment obligations such as your minimum monthly balance, your homeownership is in jeopardy.
Real Life Example
Bonnie is buying a $300,000 home and has $30,000 saved for her down payment. She needs to borrow the remaining $270,000. She works with a mortgage broker to take out a first mortgage for 80 percent of the purchase price ($240,000) and a home equity loan for 10 percent ($30,000). The terms of the home equity loan are fixed at 6 percent. On closing, she ends up with a $30,000 home equity loan, in addition to her $240,000 mortgage. She may pay a slightly higher interest rate on the home equity loan than on her first mortgage, but that interest is tax deductible, whereas the private mortgage insurance premiums she would have had to pay with a mortgage greater than 80 percent would not have been.
Real Life Example
Harriet wants to remodel her kitchen because she loves to cook. Also, she has heard that a modern kitchen will help her resale value when she sells the house. (She has used the My Estimator tool on Zillow, and knows that in her area kitchen remodels are good investments.)
Harriet goes to her local bank where she has a checking and savings account and gets a HELOC. The bank orders an appraisal to see if the house value justifies the HELOC. It will also check to see how much equity Harriet has in the house. Her house appraises for $400,000 and she has a mortgage with $50,000 remaining on it, so the bank knows there is $350,000 of equity there -- plenty to support a $25,000 home equity line of credit.
Harriet uses the $25,000 line to buy a new refrigerator and oven, and to pay the contractor who does her remodel.
There are two types of home equity borrowing: home equity lines of credit and home equity loans.
A HELOC, or Home Equity Line of Credit, is the right to borrow money from a lender up to a certain amount of money. The "line" is a credit line guaranteed by your house, meaning that if you can't live up to the terms of the line, then the lender has a right (after a few nasty letters) to foreclose on your house. Typically HELOCs (pronounced HEE-lock) have floating interest rates that can change periodically.
For example, a borrower might obtain a $75,000 HELOC at "prime plus one." This means that the interest rate is one percentage point higher than the Prime Rate. If Prime is 5.5%, then the HELOC is 6.5%. Remember: The rate is tied to the Prime and could change as much as at every billing date. (The change can be dramatic; e.g., in April of 2007, the Prime Rate was 8.25 percent, whereas in June of 2003, it was 4.25 percent.) Many HELOCs today have a fixed rate feature sometimes called a "Fixed Rate Partition" that allows the borrower to lock a portion of the loan amount at a fixed rate for a period of time. This feature varies greatly between different lenders.
Who should get one: Someone who might need extra cash for home improvements, or is looking at borrowing money to buy a different house (in addition to a mortgage).
Who shouldn't: Do not use a HELOC to splurge for things like vacations or to finance other consumer debts, like credit card purchases (unless you then plan to tear those cards up!). HELOCs are guaranteed by your house, which means the stakes are very high.
Home Equity Loans are when a lender gives you a set amount of money and you pay it back over a fixed payment schedule. Typically these loans have fixed interest rates. This is a better option for someone who wants to lock in a fixed interest rate, either because they think interest rates are going to increase or because they like the certainty of knowing what their payment schedule will be.
A home equity loan also is a better option than a home equity line if you know exactly how much money you need to borrow and when you want to borrow it.
How to get one: You can get a home equity loan or line either from a mortgage broker or from a bank directly. These loans are also called "second mortgages" because they are typically obtained after the home has been purchased with a first mortgage loan.
Taxes and Interest
Are HELOCs tax deductible? Sort of. Like first mortgage interest payments, home-equity borrowing differs from credit card debt in that you can deduct the interest on your tax return. But this only applies if you itemize your deductions. Also, the tax deduction on interest is limited to loan amounts up to $100,000, with some restrictions.
What determines the interest rate? The Loan to Value Ratio and your credit score determine the interest rate of a home equity loan or line. If your credit score is excellent (760), you may be able to get an interest rate at the prime lending rate, or possibly lower. A good credit score (700 - 760) will likely get you an interest rate that is about the same as the prime rate. Poor credit will likely result in rates of 1 - 5 points higher than the prime rate. Except in some cases, you should be able to avoid fees such as application or appraisal fees, though you might get hit with an annual fee or a small "recording" fee.
The Good News
Home equity lines can be used by the borrower to pay for anything. You literally get a checkbook for the HELOC and you can write checks to your heart's content until you've maxed out the line's limit. Although HELOCs were originally designed for homeowners to pay for home improvements and other house-related projects, nowadays borrowers use home equity lines for almost anything. Most HELOCs also have online Internet access so you can pay bills online using your HELOC just like you would with a regular online checking account.
HELOCs and home equity loans can also be used as second mortgages at the time of purchase. Frequently they are the second purchase mortgage for 10, 15, or 20 percent of the purchase price when buying a home. Home buyers can avoid buying mortgage insurance (PMI) if they take out two loans instead of one, with no single loan exceeding 80 percent of the purchase price. HELOCs can fill this gap, wherein the first mortgage is frequently 80 percent of the purchase price and the HELOC is the second mortgage.
Like a credit card balance, you can pay down a HELOC at any time, without penalties.
The Not-So-Good-News
Home equity lines are serious stuff, since they're secured by your house. If you can't meet the payment obligations such as your minimum monthly balance, your homeownership is in jeopardy.
Real Life Example
Bonnie is buying a $300,000 home and has $30,000 saved for her down payment. She needs to borrow the remaining $270,000. She works with a mortgage broker to take out a first mortgage for 80 percent of the purchase price ($240,000) and a home equity loan for 10 percent ($30,000). The terms of the home equity loan are fixed at 6 percent. On closing, she ends up with a $30,000 home equity loan, in addition to her $240,000 mortgage. She may pay a slightly higher interest rate on the home equity loan than on her first mortgage, but that interest is tax deductible, whereas the private mortgage insurance premiums she would have had to pay with a mortgage greater than 80 percent would not have been.
Real Life Example
Harriet wants to remodel her kitchen because she loves to cook. Also, she has heard that a modern kitchen will help her resale value when she sells the house. (She has used the My Estimator tool on Zillow, and knows that in her area kitchen remodels are good investments.)
Harriet goes to her local bank where she has a checking and savings account and gets a HELOC. The bank orders an appraisal to see if the house value justifies the HELOC. It will also check to see how much equity Harriet has in the house. Her house appraises for $400,000 and she has a mortgage with $50,000 remaining on it, so the bank knows there is $350,000 of equity there -- plenty to support a $25,000 home equity line of credit.
Harriet uses the $25,000 line to buy a new refrigerator and oven, and to pay the contractor who does her remodel.
Home Value by Square Foot:
One of the biggest determining factors in determining comparable value is square footage.
When comparing the square footage of homes always try to keep comps as similar in square footage as possible. Figuring out the price of a home on a square footage basis is an excellent way to compare apples with apples. It becomes more complicated when one home has been renovated and another needs work. Don't compare a newly built home's price per square foot with an older home's price per square foot.
There's Square Footage and There's Square Footage
A square foot is defined as a two-dimensional square measuring one foot on each side. If you are looking at a home that seems a little smaller than the stated square footage, it might not be your eyes. Real estate brokers tend to measure square footage by inside room dimensions. Developers like to measure the exterior of the building. This can add considerable square footage to the home.
You also need to find out exactly what has been factored into the equation. Does the total measurement include basement space? Garage space? Deck space? Space on staircases? There's no standard way to measure square footage. Sellers will include every nook and cranny and buyers won't.
Do not solely compare the size of the land the property sits on and the price of the property. Lots sell for different prices than homes and the cost varies greatly from neighborhood to neighborhood. For example, if the house is in terrible shape, or is considered a "tear-down," a developer may only want to pay for the price of the lot, since tearing down and hauling away the existing structure is an added expense.
Side-by-Side Comparison
In some areas of the country, agents do not want to be liable for representing a total square footage of the property. Total square footage is not indicated on the listing sheet, but room dimensions are shown. The room count may not include bathrooms, hallways, closets, and other spaces. You might have to compare every room side by side and guesstimate total size.
In this instance, estimate the total square footage by multiplying the dimensions of each room. For example, if the bedroom is 10 feet by 12 feet, then the area, or square footage, is 120 square feet. Add up all of the room dimensions for a total square foot measurement. You may still have to estimate hallways and other spaces, but it gives you a good estimate.
After determining the size of the home you desire, the equation is simple. Just divide the listing price by the number of square feet and you will get the price per square foot. For example, a 1,000-square-foot condo priced at $300,000 costs $300 per square foot.
It's always to your advantage to buy a home with a reasonable cost per square foot. A home with a square footage cost lower than other homes in the neighborhood might be a great deal. On the other hand, the home may have a lot of other things wrong with it that need renovation, and unless you had remodeling in the budget, it might not be worth it to you.
When comparing the square footage of homes always try to keep comps as similar in square footage as possible. Figuring out the price of a home on a square footage basis is an excellent way to compare apples with apples. It becomes more complicated when one home has been renovated and another needs work. Don't compare a newly built home's price per square foot with an older home's price per square foot.
There's Square Footage and There's Square Footage
A square foot is defined as a two-dimensional square measuring one foot on each side. If you are looking at a home that seems a little smaller than the stated square footage, it might not be your eyes. Real estate brokers tend to measure square footage by inside room dimensions. Developers like to measure the exterior of the building. This can add considerable square footage to the home.
You also need to find out exactly what has been factored into the equation. Does the total measurement include basement space? Garage space? Deck space? Space on staircases? There's no standard way to measure square footage. Sellers will include every nook and cranny and buyers won't.
Do not solely compare the size of the land the property sits on and the price of the property. Lots sell for different prices than homes and the cost varies greatly from neighborhood to neighborhood. For example, if the house is in terrible shape, or is considered a "tear-down," a developer may only want to pay for the price of the lot, since tearing down and hauling away the existing structure is an added expense.
Side-by-Side Comparison
In some areas of the country, agents do not want to be liable for representing a total square footage of the property. Total square footage is not indicated on the listing sheet, but room dimensions are shown. The room count may not include bathrooms, hallways, closets, and other spaces. You might have to compare every room side by side and guesstimate total size.
In this instance, estimate the total square footage by multiplying the dimensions of each room. For example, if the bedroom is 10 feet by 12 feet, then the area, or square footage, is 120 square feet. Add up all of the room dimensions for a total square foot measurement. You may still have to estimate hallways and other spaces, but it gives you a good estimate.
After determining the size of the home you desire, the equation is simple. Just divide the listing price by the number of square feet and you will get the price per square foot. For example, a 1,000-square-foot condo priced at $300,000 costs $300 per square foot.
It's always to your advantage to buy a home with a reasonable cost per square foot. A home with a square footage cost lower than other homes in the neighborhood might be a great deal. On the other hand, the home may have a lot of other things wrong with it that need renovation, and unless you had remodeling in the budget, it might not be worth it to you.
Home Pricing Strategies:
Just as a football coach has a bunch of different plays to choose from and use throughout a game, you have a variety of strategies to help you determine the price of your home. No one strategy can stand alone, but used together they can narrow the best possible price for your home.
Review Comparables
After sizing up the landscape, comparables play the biggest role in setting the price. Considered part art, part science, "comps" are regarded as the single-best tool in determining a home's value. There are some tricks determining which comps are the best; see the article on Picking the Best Comps for help. You can view comps on your property or anyone else's on Zillow.com, simply by entering an address.
Look at Unsold Homes
Homes on the market that haven't sold yet are also a consideration, although not a strong one, since it's unproven whether the house will bring the money it's asking. But, look at the active competition. Find a home most similar to yours and find out how many days it has been on the market. You can also look for homes owned by celebrities, and benchmark against those houses. If the house has been sitting for a while (more than 30 days), you will see the market is not convinced that is the correct price for that home. Once you see the "Sold" sign, find out how much above or below the list price it sold for. This will give you a good idea of how the market is behaving and how aggressive you can be in setting a price.
Use Square Foot Pricing
Some neighborhoods are a mixed bag of architecture, style and size, which means if you can't find another home similar to yours, you can use square foot pricing. How? Take 3 - 5 homes as similar to yours as possible, add up the square footage and divide by the number of homes. This will give you an average per square foot for your comps. Then, add up the sold price of each home, divide by the number of homes to get the average. Lastly, divide the average sold price by the average square foot to get the average price per square foot. Once you have the average price per square foot, multiply it by your home's square footage. This is just another tool to help you price your home.
Example:
Step 1: Find the average sq. ft. of comps
Home 1: 1,950 square feetHome 2: 2,400 square feetHome 3: 1,800 square feetHome 4: 2,050 square feetTotal: 8,200 square feet
8,200 / 4 = 2,050 sq. ft.
2,050 is the average sq. ft. of your comps
Step 2: Find the average price of comps
Home 1: $310,000Home 2: $410,000Home 3: $299,000Home 4: $325,000Total: $1,344,000
$1,344,000 / 4 = $336,000
$336,000 is the average price of your comps
Step 3: Divide the average price by the average sq. ft.:
$336,000 / 2,050 = $164/per sq. ft.
$164 is the average price per sq. ft. of your comps
Step 4: Set the price of your home:
Take $164 and multiply it by your square footage to get a price. For example, if you have a 1,975-square-foot home, multiply it by $164 (e.g., 1,975 sq. ft. x $164 = $323,900).
Bingo! Your home's price: $323,900!
Get a Comparative Market Analysis (CMA)
If you've used the three strategies above, but still need reassurance, go to a real estate agent -- or two or three -- and ask them for a CMA. Whether you use the agent to sell your house or not, they will be more than willing to provide a CMA in hopes of getting your listing. It shouldn't cost you any money to get one.
Get an Appraisal
If you really need extra assurance, hire a professional appraiser. An appraiser will cost approximately $250 - $400, depending on your home size and uniqueness of the property. They will come to your home and itemize the number of rooms and amenities (e.g. swimming pool, fireplace, etc.) and will pull comps from other nearby homes that sold recently. Once they have completed their review of your home, the comps, and the market, they will furnish you with an appraisal. This will be an estimation of your property's fair market value.
Review Comparables
After sizing up the landscape, comparables play the biggest role in setting the price. Considered part art, part science, "comps" are regarded as the single-best tool in determining a home's value. There are some tricks determining which comps are the best; see the article on Picking the Best Comps for help. You can view comps on your property or anyone else's on Zillow.com, simply by entering an address.
Look at Unsold Homes
Homes on the market that haven't sold yet are also a consideration, although not a strong one, since it's unproven whether the house will bring the money it's asking. But, look at the active competition. Find a home most similar to yours and find out how many days it has been on the market. You can also look for homes owned by celebrities, and benchmark against those houses. If the house has been sitting for a while (more than 30 days), you will see the market is not convinced that is the correct price for that home. Once you see the "Sold" sign, find out how much above or below the list price it sold for. This will give you a good idea of how the market is behaving and how aggressive you can be in setting a price.
Use Square Foot Pricing
Some neighborhoods are a mixed bag of architecture, style and size, which means if you can't find another home similar to yours, you can use square foot pricing. How? Take 3 - 5 homes as similar to yours as possible, add up the square footage and divide by the number of homes. This will give you an average per square foot for your comps. Then, add up the sold price of each home, divide by the number of homes to get the average. Lastly, divide the average sold price by the average square foot to get the average price per square foot. Once you have the average price per square foot, multiply it by your home's square footage. This is just another tool to help you price your home.
Example:
Step 1: Find the average sq. ft. of comps
Home 1: 1,950 square feetHome 2: 2,400 square feetHome 3: 1,800 square feetHome 4: 2,050 square feetTotal: 8,200 square feet
8,200 / 4 = 2,050 sq. ft.
2,050 is the average sq. ft. of your comps
Step 2: Find the average price of comps
Home 1: $310,000Home 2: $410,000Home 3: $299,000Home 4: $325,000Total: $1,344,000
$1,344,000 / 4 = $336,000
$336,000 is the average price of your comps
Step 3: Divide the average price by the average sq. ft.:
$336,000 / 2,050 = $164/per sq. ft.
$164 is the average price per sq. ft. of your comps
Step 4: Set the price of your home:
Take $164 and multiply it by your square footage to get a price. For example, if you have a 1,975-square-foot home, multiply it by $164 (e.g., 1,975 sq. ft. x $164 = $323,900).
Bingo! Your home's price: $323,900!
Get a Comparative Market Analysis (CMA)
If you've used the three strategies above, but still need reassurance, go to a real estate agent -- or two or three -- and ask them for a CMA. Whether you use the agent to sell your house or not, they will be more than willing to provide a CMA in hopes of getting your listing. It shouldn't cost you any money to get one.
Get an Appraisal
If you really need extra assurance, hire a professional appraiser. An appraiser will cost approximately $250 - $400, depending on your home size and uniqueness of the property. They will come to your home and itemize the number of rooms and amenities (e.g. swimming pool, fireplace, etc.) and will pull comps from other nearby homes that sold recently. Once they have completed their review of your home, the comps, and the market, they will furnish you with an appraisal. This will be an estimation of your property's fair market value.
Real Estate Pricing Checklist:
You are anxious to get that sign up, but hold on! Before you set the price on your house, take a look at what's going on. Not only your perspective of things, but from the current mood of the market. The market is not sympathetic to "you need" or "must have" pricing methods. The time spent here may save certain headaches and disappointment that lay ahead if utilizing these strategies in determining your home's current value. The home is worth what a buyer is willing to pay for it in an open market. So please take some time and review the following strategies.
What is your Mindset
A seller's biggest advantage is time, because the more time you have, the more you can prepare and do your homework. However, if you're in a rush to sell, you're at the mercy of the buyer; you won't have the luxury of preparing or waiting for an ideal one.
Do not disclose your timetable to anyone, except your agent. If you can't trust your agent don't do business with them. Your agent has a duty of confidentiality to you per your written contract and will only disclose information you as the seller give permission to disclose. A rushed seller means a bargain for the buyer and savvy buyers can smell panic a mile away. If you're planning on selling in the next 6 to 12 months, you have lots of time to prepare.
As odd as it sounds, sometimes people sabotage their own intentions by being too greedy. Don't do it! As you really start looking at homes on the market, you will develop a sense about what is priced low, high, or just right. Doing your homework here will help you truly understand home values and you will be able to set a reasonable price -- a price that buyers know is just right.
Tracking neighborhood values - You need to become somewhat of a snoop because you need to learn more about your neighborhood than you ever thought possible.
Mood of the Market
Markets have moods? They do! You need to judge whether it's a sellers' market or a buyers' market and it could vary by city, state, and neighborhood. Your interest is in your own neighborhood.
And when we mention "market", we don't mean the neighborhood grocery store. The market is a catch-all term for all the ingredients that go into the mood of real estate at a given time. It can include such things as interest rates, home inventory, job forecasts, and even time of year. The market shifts constantly, so you need to raise your antennae and tune into what's going on in your neighborhood.
Market Mood Checklist
Inventory. How much is out there? Assess the inventory of homes in your area by driving around or use online sites to search for sale homes in your neighborhood. Also, real estate agents send out monthly mailers detailing home sales and include all kinds of information, such as number of homes that are on the market. If you live in a desirable neighborhood and there aren't many homes for sale, you will have a clear edge here. However, if you drive around and do see lots of homes on the market and they're not selling very quickly, you might have to reduce the price you had in mind.
Days on the market. Review the homes in your neighborhood and their days on market (DOM). Once again, that real estate mailer that you were throwing away for all those years will now come in quite handy.
Look up your ZIP code's Zindex on Zillow.com. Look at trends for the past year and assess whether homes were appreciating or depreciating (e.g. homes in your ZIP code were rising by 2% each month for the past 6 months). Unless you see a downward tick in this number, you can probably assume this will continue. If the Zindex in your neighborhood is rising, that means people are in the buying mood. If the Zindex is on a downturn, that means buyers have the upper hand.
Check your local news. If Zillow does not provide a Zindex for your home (in which case, Zillow provides you with a tax assessed value), check your local newspaper's real estate section for charts or articles on sales trends in your ZIP code.
Jobs, jobs, jobs. Monitor the job situation in your area. Are companies or factories closing down? Not a good sign. But, if "Major ABC Company" in your local town is expanding, kick your heels up because that means jobs, more people, and more housing will be required. This is good.
Track neighborhood values. Each week, walk or drive around your neighborhood and begin collecting listing sheets -- you know, those fliers that agents create to list the facts and amenities of a home. It's amazing the knowledge you gain by tracking neighborhood home values and price points. Ideally, find homes similar to yours and pay close attention to the "action" surrounding them. Are they getting lots of traffic? As you collect these listing sheets, put them in a folder and date each sheet. Make note of the list price, sold price, and days on market (DOM).
Attend nearby open houses. This is good for a number of reasons: to observe how other properties are showing and to assess their value, to chat up the listing agent (they have loads of info to share), and to feel the "mood" of potential buyers. Once you do this weekly, you will get an excellent feel for home values and what potential buyers are after. After doing this for a couple of weeks, challenge yourself by guessing what homes "go for" as you approach them for the first time. You'll be surprised at how well-trained your eye becomes with some practice and exposure to homes.
Tour some homes with your agent. Get out there -- act like a buyer and see what they see! Hear other sellers make mistakes, hover over you, or talk too much or apologize for condition!
Price per square foot. If you don't want to go down on your asking price, you could choose to focus on your price per square foot. Show potential buyers how your price stacks up against others in the neighborhood.
What is your Mindset
A seller's biggest advantage is time, because the more time you have, the more you can prepare and do your homework. However, if you're in a rush to sell, you're at the mercy of the buyer; you won't have the luxury of preparing or waiting for an ideal one.
Do not disclose your timetable to anyone, except your agent. If you can't trust your agent don't do business with them. Your agent has a duty of confidentiality to you per your written contract and will only disclose information you as the seller give permission to disclose. A rushed seller means a bargain for the buyer and savvy buyers can smell panic a mile away. If you're planning on selling in the next 6 to 12 months, you have lots of time to prepare.
As odd as it sounds, sometimes people sabotage their own intentions by being too greedy. Don't do it! As you really start looking at homes on the market, you will develop a sense about what is priced low, high, or just right. Doing your homework here will help you truly understand home values and you will be able to set a reasonable price -- a price that buyers know is just right.
Tracking neighborhood values - You need to become somewhat of a snoop because you need to learn more about your neighborhood than you ever thought possible.
Mood of the Market
Markets have moods? They do! You need to judge whether it's a sellers' market or a buyers' market and it could vary by city, state, and neighborhood. Your interest is in your own neighborhood.
And when we mention "market", we don't mean the neighborhood grocery store. The market is a catch-all term for all the ingredients that go into the mood of real estate at a given time. It can include such things as interest rates, home inventory, job forecasts, and even time of year. The market shifts constantly, so you need to raise your antennae and tune into what's going on in your neighborhood.
Market Mood Checklist
Inventory. How much is out there? Assess the inventory of homes in your area by driving around or use online sites to search for sale homes in your neighborhood. Also, real estate agents send out monthly mailers detailing home sales and include all kinds of information, such as number of homes that are on the market. If you live in a desirable neighborhood and there aren't many homes for sale, you will have a clear edge here. However, if you drive around and do see lots of homes on the market and they're not selling very quickly, you might have to reduce the price you had in mind.
Days on the market. Review the homes in your neighborhood and their days on market (DOM). Once again, that real estate mailer that you were throwing away for all those years will now come in quite handy.
Look up your ZIP code's Zindex on Zillow.com. Look at trends for the past year and assess whether homes were appreciating or depreciating (e.g. homes in your ZIP code were rising by 2% each month for the past 6 months). Unless you see a downward tick in this number, you can probably assume this will continue. If the Zindex in your neighborhood is rising, that means people are in the buying mood. If the Zindex is on a downturn, that means buyers have the upper hand.
Check your local news. If Zillow does not provide a Zindex for your home (in which case, Zillow provides you with a tax assessed value), check your local newspaper's real estate section for charts or articles on sales trends in your ZIP code.
Jobs, jobs, jobs. Monitor the job situation in your area. Are companies or factories closing down? Not a good sign. But, if "Major ABC Company" in your local town is expanding, kick your heels up because that means jobs, more people, and more housing will be required. This is good.
Track neighborhood values. Each week, walk or drive around your neighborhood and begin collecting listing sheets -- you know, those fliers that agents create to list the facts and amenities of a home. It's amazing the knowledge you gain by tracking neighborhood home values and price points. Ideally, find homes similar to yours and pay close attention to the "action" surrounding them. Are they getting lots of traffic? As you collect these listing sheets, put them in a folder and date each sheet. Make note of the list price, sold price, and days on market (DOM).
Attend nearby open houses. This is good for a number of reasons: to observe how other properties are showing and to assess their value, to chat up the listing agent (they have loads of info to share), and to feel the "mood" of potential buyers. Once you do this weekly, you will get an excellent feel for home values and what potential buyers are after. After doing this for a couple of weeks, challenge yourself by guessing what homes "go for" as you approach them for the first time. You'll be surprised at how well-trained your eye becomes with some practice and exposure to homes.
Tour some homes with your agent. Get out there -- act like a buyer and see what they see! Hear other sellers make mistakes, hover over you, or talk too much or apologize for condition!
Price per square foot. If you don't want to go down on your asking price, you could choose to focus on your price per square foot. Show potential buyers how your price stacks up against others in the neighborhood.
Increasing Seller's Property Value:
Understand first of all that there IS a difference between price and value. Price is the amount you are asking for the property. Value is buyer perceived, and this perception of value is influenced by many factors such as location, features, condition, comparison to other purchase option, etc. By attending to details that can have a positive impact on the value, sellers can significantly increase their chance of attracting qualified buyers willing to pay the asking price.
Some tips to achieve a positive impact on value are:
Perceived size impacts value, even more so than actual square footage. Open floor plans make a room feel bigger than larger spaces with smaller rooms. Showing property that is furniture free, or at reduced clutter, helps to make the space feel bigger.
Vacancy increases sale-ability. Property is easier to show and easier to sell, and quicker to take possession of when it is vacant at the time it is offered for sale. Evidence of problems to take possession of the property -- such as encroachments, or tenants who wont allow buyer tours -- negatively impact value. Vacancy also helps the buyer walk through the property imagining ownership. Sellers should remove personal trinkets and family pictures as well as being conveniently absent during a buyer tour.
Cosmetics are important.
Fresh paint will always add more value than it costs.
Clean or new carpet/flooring adds more value than it costs.
Landscaping adds more value than it costs. At the very minimum, make the entrance area neat.
If you can, add some colorful flowers and new sod.
Take care of the obvious! The spot on the ceiling from the roof leak takes thousands of dollars from the perceived value and the offer price.
Condition affects value. Do a seller's home inspection to identify and fix the problem BEFORE closing. No point holding up your check a few extra days; plus a failed buyer's inspection could cost you the sale. Buyers will often bargain down your asking price to accomodate for property condition and repairs.
If you can, remodel/update the kitchen and master bathroom. These two areas have a big impact on home buying decisions.
Strategic renovations impact value and your bottom line. Don't spend more money to renovate the place than you can recapture in value on the sales price.
Some tips to achieve a positive impact on value are:
Perceived size impacts value, even more so than actual square footage. Open floor plans make a room feel bigger than larger spaces with smaller rooms. Showing property that is furniture free, or at reduced clutter, helps to make the space feel bigger.
Vacancy increases sale-ability. Property is easier to show and easier to sell, and quicker to take possession of when it is vacant at the time it is offered for sale. Evidence of problems to take possession of the property -- such as encroachments, or tenants who wont allow buyer tours -- negatively impact value. Vacancy also helps the buyer walk through the property imagining ownership. Sellers should remove personal trinkets and family pictures as well as being conveniently absent during a buyer tour.
Cosmetics are important.
Fresh paint will always add more value than it costs.
Clean or new carpet/flooring adds more value than it costs.
Landscaping adds more value than it costs. At the very minimum, make the entrance area neat.
If you can, add some colorful flowers and new sod.
Take care of the obvious! The spot on the ceiling from the roof leak takes thousands of dollars from the perceived value and the offer price.
Condition affects value. Do a seller's home inspection to identify and fix the problem BEFORE closing. No point holding up your check a few extra days; plus a failed buyer's inspection could cost you the sale. Buyers will often bargain down your asking price to accomodate for property condition and repairs.
If you can, remodel/update the kitchen and master bathroom. These two areas have a big impact on home buying decisions.
Strategic renovations impact value and your bottom line. Don't spend more money to renovate the place than you can recapture in value on the sales price.
Monday, October 29, 2007
Commercial Property: Buying and Selling:
If you are looking to buy or sell commercial property, your best bet is to engage a real estate attorney who can advise you on legal matters involving the transfer. As with home purchases, it’s important to have the property inspected thoroughly before committing to buy. You will also want to ensure that zoning laws permit you to renovated buildings to suit your needs – for example, buildings that are zoned as small retail outlets may not always be turned into restaurants; warehouses may not necessarily be converted to apartment complexes. Real estate lawyers will make sure that you know as much as possible about your property before you buy.
Choosing a Real Estate Professional:
Although some people prefer to work on their own, it is usually good to hire a licensed real estate professional if you are looking to buy or sell a house. You may choose between a real estate broker, who is independently licensed to review the entire market and show any house that suits your needs, and a real estate agent who works for a specific company and is usually restricted to showing properties in that company’s listings. Which one you choose will depend on your needs, budget, and the number of real estate companies competing in your area. If there are a large number of companies, you may do better with a broker, but if there are only a few, you can save money by using an agent.
No matter what type of professional you choose, there are a few things you should consider before making your decision. How does the agent or broker intend to market your house? How successful has he been in the past, particularly with homes in your range and area? If he is an agent, what is his company’s track record? What is the time limit on the contract you will sign, and can you break it if you’re dissatisfied? Do you feel comfortable that he understands your needs and will work hard to meet them? Recall that, above all, real estate agents are salespeople, so be sure that you are confident that they are working with you as well as for their employers. A great way to narrow down choices is to check the Internet for websites that compare companies and agents in your area. You may also want to talk with friends who have recently moved about their experiences with local agents and brokers.
No matter what type of professional you choose, there are a few things you should consider before making your decision. How does the agent or broker intend to market your house? How successful has he been in the past, particularly with homes in your range and area? If he is an agent, what is his company’s track record? What is the time limit on the contract you will sign, and can you break it if you’re dissatisfied? Do you feel comfortable that he understands your needs and will work hard to meet them? Recall that, above all, real estate agents are salespeople, so be sure that you are confident that they are working with you as well as for their employers. A great way to narrow down choices is to check the Internet for websites that compare companies and agents in your area. You may also want to talk with friends who have recently moved about their experiences with local agents and brokers.
Real Estate Basics:
Are you looking to buy or sell a home or other piece of property? The real estate market is a difficult one, and should not be entered casually. With the right information, you can make your venture a success, but all to often lack of foresight and failure to do the proper exploration leave consumers in unfortunate situations that are difficult to rectify. An educated consumer is a happy consumer, and in no market is this truer than the property market. Before you commit, learn as much as you can – whether you’re buying or selling, you’ll never regret doing a little extra research.
To begin with the basics, let’s consider a few definitions. “Real Property” is legally defined as “land and improvements permanently attached to the land.” Improvements include everything from houses and garages to in-ground swimming pools, but exclude portable items like mobile homes and tool sheds. Also included in real property are substances beneath the land, such as gas, minerals and oil.
There are many types of real estate, but most consumers will encounter only two: single-family homes and commercial property. Commercial property may include spaces used for retail, office, shopping, hotels, warehouses, manufacturing facilities, apartment complexes, as well as vacant land zoned to be used for any of those purposes. Aside from specialty properties like farms and industrial sites, almost any property to be used for anything besides a single-family homes is considered commercial.
Different rules govern transactions involving each kind of property, and it’s important to know what you will encounter before you get started. The use of any property is limited by zoning laws, which govern the purpose – for example, housing, retail, or industrial – for which the real estate can be used. Zoning laws also restrict the size and height of buildings, the portion of property that may be used for parking, how far buildings must be set from the street and from each other, and whether and what kind of hazardous materials can be stored there. Public easement and right of way laws, which fall into the general category of zoning, outline whether and which parts of private property must be reserved for public use, usually in the form of sidewalks, electrical lines, sewer pipes, fire hydrants and similar public goods. Laws differ from town to town, so if you are looking at multiple locations, keep track of how each municipality’s rules will affect how you can use your property.
To begin with the basics, let’s consider a few definitions. “Real Property” is legally defined as “land and improvements permanently attached to the land.” Improvements include everything from houses and garages to in-ground swimming pools, but exclude portable items like mobile homes and tool sheds. Also included in real property are substances beneath the land, such as gas, minerals and oil.
There are many types of real estate, but most consumers will encounter only two: single-family homes and commercial property. Commercial property may include spaces used for retail, office, shopping, hotels, warehouses, manufacturing facilities, apartment complexes, as well as vacant land zoned to be used for any of those purposes. Aside from specialty properties like farms and industrial sites, almost any property to be used for anything besides a single-family homes is considered commercial.
Different rules govern transactions involving each kind of property, and it’s important to know what you will encounter before you get started. The use of any property is limited by zoning laws, which govern the purpose – for example, housing, retail, or industrial – for which the real estate can be used. Zoning laws also restrict the size and height of buildings, the portion of property that may be used for parking, how far buildings must be set from the street and from each other, and whether and what kind of hazardous materials can be stored there. Public easement and right of way laws, which fall into the general category of zoning, outline whether and which parts of private property must be reserved for public use, usually in the form of sidewalks, electrical lines, sewer pipes, fire hydrants and similar public goods. Laws differ from town to town, so if you are looking at multiple locations, keep track of how each municipality’s rules will affect how you can use your property.
Home For Holidays:
The holiday season is fast approaching - 'tis the season to be jolly! Planning for the holidays can include welcoming guests in your home. For many, this means getting your home in order and that might include some light remodeling. Your home needs to be in tip top shape for all the guests it needs to impress.
While remodeling may sound like a task you don't want to tackle as the days get shorter, there's minor things you can do that are both affordable and quick. The rooms that will see the most traffic are inevitably the kitchen and the bathroom. They are also the two spaces that will see the most return in value if you decide to sell your home in the future. A bit of focused attention in these two rooms will make your in-laws want to stay forever.
In the kitchen:
Cabinets - Replacing them might be a mountain of a task, but replacing the hardware isn't. A new trend is brushed nickel - gives off a shine while hiding nicks and scratches. Count the knobs, pulls and hinges you'll need before you head off to the store.
Paint - Look at your ceiling. Typically the most neglected, it can be the one spot with the most power to brighten up a room. Or, if your kitchen is mostly neutral, choose a single wall to spice up with a bold new color.
Lighting - While you're staring at your ceiling, consider some new lighting fixtures that might be more modern or welcoming. Most are easy to install and won't break your budget.
In the bathroom:
Paint - Most bathrooms are a breeze to paint and can be done in a couple hours. Pick up a contrasting rug and towels for a finished look.
Faucet - a shiny new faucet could really give your sink a sharp look.
Mirrors - Since bathrooms are small, adding a mirror or two can add depth and light to a small space.
So, before you bring out the decorations, do a sweep of what can be updated and will still have value for your home in the New Year. These simple, affordable projects could be done in a weekend just in time to welcome your holiday guests.
While remodeling may sound like a task you don't want to tackle as the days get shorter, there's minor things you can do that are both affordable and quick. The rooms that will see the most traffic are inevitably the kitchen and the bathroom. They are also the two spaces that will see the most return in value if you decide to sell your home in the future. A bit of focused attention in these two rooms will make your in-laws want to stay forever.
In the kitchen:
Cabinets - Replacing them might be a mountain of a task, but replacing the hardware isn't. A new trend is brushed nickel - gives off a shine while hiding nicks and scratches. Count the knobs, pulls and hinges you'll need before you head off to the store.
Paint - Look at your ceiling. Typically the most neglected, it can be the one spot with the most power to brighten up a room. Or, if your kitchen is mostly neutral, choose a single wall to spice up with a bold new color.
Lighting - While you're staring at your ceiling, consider some new lighting fixtures that might be more modern or welcoming. Most are easy to install and won't break your budget.
In the bathroom:
Paint - Most bathrooms are a breeze to paint and can be done in a couple hours. Pick up a contrasting rug and towels for a finished look.
Faucet - a shiny new faucet could really give your sink a sharp look.
Mirrors - Since bathrooms are small, adding a mirror or two can add depth and light to a small space.
So, before you bring out the decorations, do a sweep of what can be updated and will still have value for your home in the New Year. These simple, affordable projects could be done in a weekend just in time to welcome your holiday guests.
For Home Sellers:
Home Sellers: Don't 'Scare Away' Buyers This HalloweenBy Lauren Baier Kim
Last October, Jacky Teplitzky got a fright when she entered the residence of one of her clients and was transported into a haunted house.
A broker for Prudential Douglas Elliman, Ms. Teplitzky mostly sells homes in Manhattan's high-end market. This particular apartment had been listed since the end of August, and she had convinced her Upper East Side clients to clear out excess furniture in the 1,200-square-foot, two-bedroom and two-bathroom unit to make it more appealing to buyers.
When she walked in, Ms. Teplitzky expected to see less clutter. Instead she found fake witches, cadavers and pumpkins on the floor, as well as "things that make noise and surprise you," scattered around, she says. Every room in the apartment -- including the kitchen and bathrooms -- oozed Halloween decorations.
The place was so full of seasonal décor that Ms. Teplitzky had difficulty maneuvering through it. When she asked house hunters what they thought about the unit, they replied: " 'We didn't see the apartment; we only saw the decorations,' " she says.
She asked her clients -- who had decorated the home for their young children's enjoyment -- to limit the ghoulish decorations, but they were offended and refused. They kept the Halloween décor up for 31 days, and the apartment sat on the market a month longer than it should have, Ms. Teplitzky says. She finally secured a buyer in December and the unit closed in June at its listing price, $825,000, she says.
With the housing market slumping, there are already plenty of ways to dig a grave for yourself as a home seller this fall. Making sure Halloween decorations aren't a dealbreaker is relatively simple by comparison.
You don't want to "spook" house hunters, real-estate agent Phyllis MacBeth of Main Street Realtors in Long Beach, Calif., says. Some might not understand the holiday, while others may find it offensive, she explains. To avoid turning off potential buyers, opt for a neutral autumn theme over ghosts and goblins, she suggests.
Try adding displays of fall leaves, colorful mums, or pumpkins -- use white ceramic ones if orange clashes with your interior. "They look nice and make a house look more homey, while skeletons don't," she says.
Barb Schwarz, founder of Stagedhomes.com and credited as the founder of home staging, recently used carefully selected Halloween and seasonal items to help market a $1.5 million home in Palm Springs, Calif.
She didn't string up orange and black garlands or place a scary scull on the kitchen table. Instead, she put a pumpkin made of dried willow on the front porch, added a vase with gold and copper twigs and eucalyptus to the entryway, and used another arrangement in the kitchen that matched the room's black granite counters. In a child's bedroom, she replaced some toy soldiers with a set of mini pumpkins with various facial expressions. The decorations are "minimal and tasteful," she says.
She didn't want to flood the home with seasonal props, but also didn't want to ignore the holiday, either, she says. "People expect to see something happening for the season," she explains.
While Ms. Schwarz used upscale decor to give the home a holiday flavor, another option is to make your own seasonal decorations, offers James Barry of ListingBook.com, which provides client-management services for real-estate agents. If done tastefully, your crafts can show potential buyers the care and attention you devote to your home, he explains.
Looking for another way to get buyers to stop "dead" in their tracks and take notice of your home? Try using the holiday as a marketing opportunity.
Use trick or treating as an opportunity to talk up your home. One could even distribute flyers that highlight a property's top selling points, Ms. MacBeth suggests. More potential buyers are likely to visit your house this Halloween than during any open house, she says.
Or, take it a step further and host a Halloween open house, Pam O'Connor, president and chief executive officer of Leading Real Estate Companies of the World in Chicago, suggests. The event could be themed as a late afternoon cocktail hour, or a more family-friendly offering would be light refreshments and pumpkin cookies, she says. The holiday open house may be just what you need, she says, to "draw people in to see the house."
Provided it's not haunted, of course.
Last October, Jacky Teplitzky got a fright when she entered the residence of one of her clients and was transported into a haunted house.
A broker for Prudential Douglas Elliman, Ms. Teplitzky mostly sells homes in Manhattan's high-end market. This particular apartment had been listed since the end of August, and she had convinced her Upper East Side clients to clear out excess furniture in the 1,200-square-foot, two-bedroom and two-bathroom unit to make it more appealing to buyers.
When she walked in, Ms. Teplitzky expected to see less clutter. Instead she found fake witches, cadavers and pumpkins on the floor, as well as "things that make noise and surprise you," scattered around, she says. Every room in the apartment -- including the kitchen and bathrooms -- oozed Halloween decorations.
The place was so full of seasonal décor that Ms. Teplitzky had difficulty maneuvering through it. When she asked house hunters what they thought about the unit, they replied: " 'We didn't see the apartment; we only saw the decorations,' " she says.
She asked her clients -- who had decorated the home for their young children's enjoyment -- to limit the ghoulish decorations, but they were offended and refused. They kept the Halloween décor up for 31 days, and the apartment sat on the market a month longer than it should have, Ms. Teplitzky says. She finally secured a buyer in December and the unit closed in June at its listing price, $825,000, she says.
With the housing market slumping, there are already plenty of ways to dig a grave for yourself as a home seller this fall. Making sure Halloween decorations aren't a dealbreaker is relatively simple by comparison.
You don't want to "spook" house hunters, real-estate agent Phyllis MacBeth of Main Street Realtors in Long Beach, Calif., says. Some might not understand the holiday, while others may find it offensive, she explains. To avoid turning off potential buyers, opt for a neutral autumn theme over ghosts and goblins, she suggests.
Try adding displays of fall leaves, colorful mums, or pumpkins -- use white ceramic ones if orange clashes with your interior. "They look nice and make a house look more homey, while skeletons don't," she says.
Barb Schwarz, founder of Stagedhomes.com and credited as the founder of home staging, recently used carefully selected Halloween and seasonal items to help market a $1.5 million home in Palm Springs, Calif.
She didn't string up orange and black garlands or place a scary scull on the kitchen table. Instead, she put a pumpkin made of dried willow on the front porch, added a vase with gold and copper twigs and eucalyptus to the entryway, and used another arrangement in the kitchen that matched the room's black granite counters. In a child's bedroom, she replaced some toy soldiers with a set of mini pumpkins with various facial expressions. The decorations are "minimal and tasteful," she says.
She didn't want to flood the home with seasonal props, but also didn't want to ignore the holiday, either, she says. "People expect to see something happening for the season," she explains.
While Ms. Schwarz used upscale decor to give the home a holiday flavor, another option is to make your own seasonal decorations, offers James Barry of ListingBook.com, which provides client-management services for real-estate agents. If done tastefully, your crafts can show potential buyers the care and attention you devote to your home, he explains.
Looking for another way to get buyers to stop "dead" in their tracks and take notice of your home? Try using the holiday as a marketing opportunity.
Use trick or treating as an opportunity to talk up your home. One could even distribute flyers that highlight a property's top selling points, Ms. MacBeth suggests. More potential buyers are likely to visit your house this Halloween than during any open house, she says.
Or, take it a step further and host a Halloween open house, Pam O'Connor, president and chief executive officer of Leading Real Estate Companies of the World in Chicago, suggests. The event could be themed as a late afternoon cocktail hour, or a more family-friendly offering would be light refreshments and pumpkin cookies, she says. The holiday open house may be just what you need, she says, to "draw people in to see the house."
Provided it's not haunted, of course.
Sunday, October 28, 2007
Buying and Selling: What You Need to Know:
When you are in the market to buy, your individual situation will determine whether or not to hire a professional. You may find that you can do well enough finding suitable listings without the help of an agent. However, if you live in a city where good housing is scarce, you may want to engage someone to help you discern the good from the bad. Real estate agents can also be very helpful when it’s time to close the deal, sorting out what items are included with the house (for example, appliances and furnishings) and working with the seller to divide costs fairly.
Although it is possible to sell your home without professional help, but this should be attempted with great caution. A real estate professional will help sort through potential buyers to find people who are serious, work with to get a fair price for your property, and be indispensable at closing time when it comes to dividing up property taxes and other shared costs. In general, as a seller, you should expect to run up against a number of expenses when you close on your house. These may include excise tax (a tax levied on the seller of any property or item), attorney and professional fees, property taxes, real estate commission, and fees for survey, inspection, certification and other items, depending on the laws of the state in which the house is sold.
Although it is possible to sell your home without professional help, but this should be attempted with great caution. A real estate professional will help sort through potential buyers to find people who are serious, work with to get a fair price for your property, and be indispensable at closing time when it comes to dividing up property taxes and other shared costs. In general, as a seller, you should expect to run up against a number of expenses when you close on your house. These may include excise tax (a tax levied on the seller of any property or item), attorney and professional fees, property taxes, real estate commission, and fees for survey, inspection, certification and other items, depending on the laws of the state in which the house is sold.
Thursday, October 4, 2007
Real Estste
Real estate or immovable property is a legal term (in some jurisdictions) that encompasses land along with anything permanently affixed to the land, such as buildings. Real estate (immovable property) is often considered synonymous with real property (also sometimes called realty), in contrast with personal property (also sometimes called chattel or personalty). However, for technical purposes, some people prefer to distinguish real estate, referring to the land and fixtures themselves, from real property, referring to ownership rights over real estate.The terms real estate and real property are used primarily in common law, while civil law jurisdictions refer instead to immovable property.In law, the word real means relating to a thing (from Latin res/rei, thing), as distinguished from a person. Thus the law broadly distinguishes between "real" property (land and anything affixed to it) and "personal" property (everything else, e.g., clothing, furniture, money). The conceptual difference was between immovable property, which would transfer title along with the land, and movable property, which a person would retain title to. (The word is not derived from the notion of land having historically been "royal" property. The word royal — and its Castilian cognate real — come from the related Latin word rex-regis, meaning king.)
British, French and Italian usages of the termIn British usage, however, “real property”, often shortened to just “property”, refers rather to land and fixtures as such while the term “real estate” is used mostly in the context of probate law, and means all interests in land held by a deceased person at death excluding interests in money arising under a trust for sale of or charged on land.In French, Italian and Spanish, real estate is called "immovables" (immobilier in French, immobili in Italian and inmueble in Spanish); other property is called "movables" (mobilier and mueble).
Business sectorWith the development of private property ownership, real estate has become a major area of business. Purchasing real estate requires a significant investment, and each parcel of land has unique characteristics, so the real estate industry has evolved into several distinct fields. Specialists are often called on to valuate real estate and facilitate transactions. Some kinds of real estate businesses include:Appraisal - Professional valuation servicesBrokerages - Assisting buyers and sellers in transactionsDevelopment - Improving land for use by adding or replacing buildingsProperty management - Managing a property for its owner(s)Real Estate Marketing - Managing the sales side of the property businessReal Estate Investing - Managing the investment of real estateRelocation services - Relocating people or business to a different countryWithin each field, a business may specialize in a particular type of real estate, such as residential, commercial, or industrial property. In addition, almost all construction business effectively has a connection to real estate."Internet Real Estate" is a term coined by the internet investment community relating to the parallel that exists between high quality internet domain names and real-world, prime real estate. Many internet companies actually use the address of properties as domain names.
LevelsAccording to The Economist, "developed economies'" assets at the end of 2002 wasResidential property: $48 trillionCommercial property: $14 trillionEquities: $20 trillionGovernment bonds: $20 trillionCorporate bonds: $13 trillionTotal: $115 trillionThat makes real estate assets 54% and financial assets 46% of total stocks, bonds, and real estate assets. Assets not counted here are bank deposits, insurance "reserve" assets, and human assets; also it is not clear if all debt and equity investments are counted in the categories equities and bonds. For US asset levels see FRB: Z.1 Release-- Flow of Funds Accounts of the United States.
Mortgages in real estateIn recent years, many economists have recognized that the lack of effective real estate laws can be a significant barrier to investment in many developing countries. In most societies, rich or poor, a significant fraction of the total wealth is in the form of land and buildings.In most advanced economies, the main source of capital used by individuals and small companies to purchase and improve land and buildings is mortgage loans (or other instruments). These are loans for which the real property itself constitutes collateral. Banks are willing to make such loans at favorable rates in large part because, if the borrower does not make payments, the lender can foreclose by filing a court action which allows them take back the property and sell it to get their money back. For investors, profitability can be enhanced by using an off plan or pre-construction strategy to purchase at a lower price which is often the case in the pre-construction phase of development.But in many developing countries there is no effective means by which a lender could foreclose, so the mortgage loan industry, as such, either does not exist at all or is only available to members of privileged social classes.
Real estate in Mexico and Central AmericaReal estate in Mexico and Central America is different from the way that it is conducted in the United States.Some similarities include a variety of legal formalities, (with professionals such as real estate agents generally employed to assist the buyer); taxes need to be paid (but typically less than those in U.S.); legal paperwork will ensure title; and a neutral party such as a title company will handle documentation and monies in order to smoothly make the exchange between the parties. Increasingly, US title companies are doing work for US buyers in Mexico and Central America.Prices are often much cheaper than most areas of the U.S., but in many locations prices of houses and lots are as expensive as the US, one example being Mexico City. U.S. banks have begun to give home loans for properties in Mexico, but, so far, not for other Central American countries.One important difference from the United States is that each country has rules regarding where foreigners can buy. For example, in Mexico, they cannot buy land or homes within 50km of the coast or 100km from a border, while, in Honduras, they may buy beach front property. There are also different special rules regarding certain types of property: ejidos - communally held farm property - cannot be sold to anyone, but that does not prevent them from being offered for sale.Many websites advertising and selling Mexican and Central American real estate exist, but they may need to be researched.
Real estate brokerFrom Wikipedia, the free encyclopediaJump to: navigation, searchA real estate broker is a party who acts as an intermediary between sellers and buyers of real estate and attempts to find sellers who wish to sell and buyers who wish to buy. In the United States, the relationship was originally established by reference to the English common law of agency with the broker having a fiduciary relationship with his clients. Estate agent is the term used in the United Kingdom to describe a person or organization whose business is to market real estate on behalf of clients.In the US, real estate brokers and their salespersons (commonly called "real estate agents" or, in some states, "brokers")[1] assist sellers in marketing their property and selling it for the highest possible price under the best terms. When acting as a Buyer's agent with a signed agreement (or, in many cases, verbal agreement, although a broker may not be legally entitled to his commission unless the agreement is in writing), they assist buyers by helping them purchase property for the lowest possible price under the best terms. Without a signed agreement, brokers may assist buyers in the acquisition of property but still represent the seller and the seller's interests.In most jurisdictions in the United States, a person is required to have a license in order to receive remuneration for services rendered as a real estate broker. Unlicensed activity is illegal, but buyers and sellers acting as principals in the sale or purchase of real estate are not required to be licensed. In some states, lawyers are allowed to handle real estate sales for compensation without being licensed as brokers or agents
The difference between salespersons and brokers
In the past, when brokers (and their agents) only represented sellers, the term ‘’real estate salesperson’’ may have been more appropriate than it is today, given the different ways that brokers and their agents can help a buyer through the process rather than simply “sell’’ him or her a property. Legally however, the term 'salesperson' is still used in many states to describe a real estate agent.Real estate education: In order to become licensed, most states require that an applicant take a minimum number of classes before taking the state licensing exam. Such education is often provided by real estate brokerages as a means to finding new agents.Today in many states, the real estate agent (acting as an agent of the broker with whom he/she is employed) is required to disclose to prospective buyers and sellers who represents whom. See below for a broker/agent’s relationship to sellers and their relationship to buyers.While some people may refer to any licensed real estate agent as a real estate broker, a licensed real estate agent is a professional who has obtained either a real estate salesperson's license or a real estate broker's license.In the United States, there are commonly two levels of real estate professionals licensed by the individual states, but not by the federal government:Real estate salesperson (or, in some states, Real estate broker): When a person first becomes licensed to become a real estate agent, he/she obtains a real estate salesperson's license (or some states use the alternative term, "broker") from the state in which he/she will practice. To obtain a real estate license, the candidate must take specific coursework (of between 40 and 90 hours) and then pass a state exam on real estate law and practice. In order to work, salespersons must then be associated with (and act under the authority of) a real estate broker.Many states also have reciprocal agreements with other states, allowing a licensed individual from a qualified state to take the second state's exam without completing the course requirements, or, in some cases, take only a state law exam.Real estate broker (or, in some states, Qualifying Broker):After gaining some years of experience in real estate sales, a salesperson may decide to become licensed as a real estate broker (or Principal/Qualifying broker) in order to own, manage or operate his/her own brokerage. Commonly more course work and a broker's state exam on real estate law must be passed. Upon obtaining a broker's license, a real estate agent may continue to work for another broker in a similar capacity as before (often referred to as a broker associate or associate broker) or take charge of his/her own brokerage and hire other salespersons (or broker) licensees. Becoming a branch office manager may or may not require a broker's license. Some states such as New York allow licensed attorneys to become real estate brokers without taking any exam. In states, such as Colorado, there are no "salespeople", as all licensees are Brokers.A REALTOR, pronounced “Real-tor” (re??l tor), is a real estate salesperson or broker who is a member of the National Association of Realtors (NAR). All Realtors are brokers/salespersons, but not all brokers/salespersons are Realtors.
Agency relationships with clients versus Non-Agency relationships with customersAgency relationship: Traditionally, the broker provides a conventional full-service, commission-based brokerage relationship under a signed listing agreement with a seller or "buyer representation" agreement with a buyer, thus creating under common law in most states an agency relationship with fiduciary obligations. The seller or buyer is then a client of the broker. Some states also have statutes which define and control the nature of the representation.Agency relationships in residential real estate transactions involve the legal representation by a real estate broker (on behalf of a real estate company) of the principal, whether that person or persons is a buyer or a seller. The broker (and his/her licensed real estate agents) then becomes the agent of the principal.Non-agency relationship: where no written agreement nor fiduciary relationship exists, a real estate broker (and his agents) works with a principal who is then known as the broker’s customer. When a buyer, who has not entered into a Buyer Agency agreement with the broker and buys a property, then that broker functions as the sub-agent of the seller’s broker. When a seller chooses to work with a transaction broker, there is no agency relationship created.
Transaction brokersSome state Real Estate Commissions, notably Florida's after 1992 (and extended in 2003) and Colorado's after 1994 (with changes in 2003), created the option of having no agency nor fiduciary relationship between brokers and sellers or buyers. The transaction broker assists buyers, sellers, or both during the transaction without representing the interests of either party. They may be then regarded as customers.As noted by the South Broward Board of Realtors, Inc. in a letter to State of Florida legislative committees :"The Transaction Broker crafts a transaction by bringing a willing buyer and a willing seller together and assists with the closing of details. The Transaction Broker is not a fiduciary of any party, but must abide by law as well as professional and ethical standards." (such as NAR Code of Ethics)The result was that in 2003, Florida created a system where the default brokerage relationship had "all licensees …operating as transaction brokers, unless a single agent or no brokerage relationship is established, in writing, with the customer" and the statute required written disclosure of the transaction brokerage relationship to the buyer or seller customer only through July 1, 2008.In both Florida and Colorado's case, dual agency and sub-agency (where both listing and selling agents represented the seller) no longer exist.
Dual or limited AgencyDual agency occurs when the same brokerage represents both the seller and the buyer under written agreements. Individual state laws vary and interpret dual agency rather differently.Many states no longer allow dual agency. Instead, Transaction Brokerage (see above) provides the Buyer and Seller with a limited form of representation, but without any fiduciary obligations (see Florida law). Buyers and sellers are generally advised to consult a licensed real estate professional for a written definition of an individual state's laws of agency, and many states require written Disclosures to be signed by all parties outlining the duties and obligations.If state law allows for the same agent to represent both the buyer and the seller in a single transaction, the brokerage/agent is typically considered to be a Dual Agent. Special laws/rules often apply to dual agents, especially in negotiating price.In some states (notably Maryland[8]), Dual Agency can be practiced in situations where the same brokerage (but not agent) represent both the buyer and the seller. If one agent from the brokerage has a home listed and another agent from that brokerage has a buyer-brokerage agreement with a buyer who wishes to buy the listed property, Dual Agency occurs by allowing each agent to be designated as “intra-company” agent. Only the broker himself is the Dual Agent.Some states do allow a broker and one agent to represent both sides of the transaction as dual agents. In those situations, conflict of interest is more likely to occur.
Types of services that a broker can provideSince each state's laws may differ from others, it is generally advised that prospective sellers or buyers consult a licensed real estate professional.Some Examples:Comparative Market Analysis - an estimate of the home's value compared with others. This differs from an appraisal in that property currently for sale may be taken into consideration (competition for the subject property).Exposure - Marketing the real property to prospective buyers.Facilitating a Purchase - guiding a buyer through the process.Facilitating a Sale - guiding a seller through the selling process.FSBO document preparation - preparing necessary paperwork for "Sale By Owner" sellers.Full Residential Appraisal - but only, in most states, if the broker is also licensed as an appraiser.Home Selling Kits - guides to how to market and sell a property.Hourly Consulting for a fee, based on the client's needs.Leasing for a fee or percentage of the gross lease value.Property Management.Exchanging property.Auctioning property.Preparing contracts and leases. (Not in all states.)
GeneralThe sellers and buyers themselves are the principals in the sale, and real estate brokers (and the broker's agents) are their agents as defined in the law. However, although a real estate agent commonly fills out the real estate contract form, agents are typically not given power of attorney to sign the real estate contract or the deed; the principals sign these documents. The respective real estate agents may include their brokerages on the contract as the agents for each principal.The use of a real estate broker is not a requirement for the sale or conveyance of real estate or for obtaining a mortgage loan from a lender. However, once a broker is used, the settlement attorney (or party handling closing) will ensure that all parties involved be paid. Lenders typically have other requirements, though, for a loan.
Services provided to both buyers and sellersIn addition to the services to sellers and buyers described below, most real estate agents coordinate various aspects of the closing.Real estate brokers (and their agents) typically do not provide title service such as title search or title insurance, do not conduct surveys or formal appraisals of the property such as those required by lenders, and do not act as lawyers for the parties, although they may "coordinate" these activities with the appropriate specialists. Some real estate brokers may be associated with loan officers who may help to finance buyers to make their purchase.Regardless of whether a real estate agent assists sellers or buyers of real estate, negotiation and financing skills are important.
Real estate brokers and sellers
Services provided to seller as clientUpon signing a listing contract with the seller wishing to sell the real estate, the brokerage attempts to earn a commission by finding a buyer for the sellers' property for highest possible price on the best terms for the seller. In Canada, most provinces' laws require the real estate agent to forward all written offers to the seller for consideration or review.To help accomplish this goal of finding buyers, a real estate agency commonly does the following:Listing the property for sale to the public, often on a Multiple Listing Service, in addition to any other methods.Based on the law in several states, providing the seller with a real property condition disclosure form, and other forms which may be needed.Preparing necessary papers describing the property for advertising, pamphlets, open houses, etc.Generally placing a "For Sale" sign on the property indicating how to contact the real estate office and agent.Advertising the property. Advertising is often the biggest outside expense in listing a property.In some cases, holding an Open house to show the property.Being a contact person available to answer any questions about the property and to schedule showing appointmentsEnsuring buyers are prescreened so that they are financially qualified to buy the property; the more highly financially qualified the buyer is, the more likely the closing will succeed.Negotiating price on behalf of the sellers. The seller's agent acts as a fiduciary for the seller. This may involve preparing a standard real estate purchase contract by filling in the blanks in the contract form.In some cases, holding an earnest payment cheque in escrow from the buyer(s) until the closing. In many states, the closing is the meeting between the buyer and seller where the property is transferred and the title is conveyed by a deed. In other states, especially those in the West, closings take place during a defined escrow period when buyers and sellers each sign the appropriate papers transferring title, but do not meet each other.
The "listing" contractSeveral types of listing contracts exist between broker and seller. These may be defined as:Exclusive Right to SellIn this type of Agreement", the broker is given the exclusive right to market the property and represents the seller exclusively. However, the brokerage also offers to co-operate with other brokers and agrees to allow them to show the property to prospective buyers and offers a share of the total real estate commission.Exclusive AgencyAn alternative form, "Exclusive Agency", allows only the broker the right to sell the property, and no offer of compensation is ever made to another broker. In that case, the property will never be entered into an MLS. Naturally, that limits the exposure of the property to only one agency.Open ListingThis is an Agreement whereby the property is available for sale by any real estate professional who can advertise, show, or negotiate the sale. Whoever first brings an acceptable offer would receive compensation. Real estate companies will typically require that a written agreement for an open listing be signed by the seller to ensure the payment of a commission if a sale should take place.Although there can be other ways of doing business, a real estate brokerage usually earns its commission after the real estate broker and a seller enter into a listing contract and fulfill agreed-upon terms specified within that contract. The seller's real estate is then listed for sale, frequently with property data entered into a Multiple Listing Service (MLS) in addition to any other ways of advertising or promoting the sale of the property.In most of North America, where brokers are members of a national association (such as NAR in the United States or the Canadian Real Estate Association), a listing agreement or contract between broker and seller must include the following: starting and ending dates of the agreement; the price at which the property will be offered for sale; the amount of compensation due to the broker and how much, if any, will be offered to a co-operating broker who may bring a buyer. Without an offer of compensation to a co-operating broker (co-op percentage or flat fee), the property may not be advertised in the MLS system.
Brokerage commissionsIn consideration of the brokerage successfully finding a satisfactory buyer for the property, a broker anticipates receiving a commission for the services the brokerage has provided. Usually, the payment of a commission to the brokerage is contingent upon finding a satisfactory buyer for the real estate for sale, the successful negotiation of a purchase contract between a satisfactory buyer and seller, or the settlement of the transaction and the exchange of money between buyer and seller.In North America a commission in the 5% to 7% range is considered "standard" for residential real estate and is typically paid by the seller at the closing of the transaction. Commissions are negotiable between seller and broker. The commission could also be paid as flat fee or some combination of flat fee and percentage, particularly in the case of lower-priced properties, vacant lots, or other unusual real estate. The details are determined by the listing contract.However, some brokers charge as much as 10% while others will offer services for 1%. Fee-for-service or flat-fee real estate brokerages are also increasing in popularity. This is not, however, the norm throughout the world. In Australia, for example, listing agents are paid between 2-4% and very few buyers use an agent. If they do, they pay out-of-pocket.Out of the commission received from the seller, the broker will typically pay any expenses incurred in doing the work of trying to sell the listed properties, such as advertisements, etc.Real estate brokers who work with lenders may not receive any compensation from the lender for referring a client to a specific lender. To do so would be a violation of a (US) federal law known as the Real Estate Settlement Procedures Act (RESPA). All compensation to a broker must be disclosed to all parties.
LockboxWith the sellers’ permission, a lockbox is placed on homes that are occupied and, after arranging an appointment with the home owner, agents can show the home. When a property is vacant or where a seller may be living elsewhere, a lockbox will generally be placed on the front door. The listing broker helps arrange showings of the property by various real estate agents from all companies associated with the MLS.The lockbox contains the key to the door of the property and the box can only be opened by licensed real estate agents (often only with authorization from the listing brokerage), by using some sort of secret combination or code provided by the brokerage or the issuer of the lockbox.Lockboxes come in two varieties - mechanical and electronic. Mechanical lockboxes utilize a combination dial or special mechanical key and are readily purchased at local home improvement centers or over the internet. Mechanical lockboxes offer the most basic protection of the homeowner's key and therefore expose the most risk of unmonitored or potentially unauthorized access to the home during the sales process. The risk stems primarily from an agent forgetting to change the combination after each sale. The frequency of use of mechanical lockboxes by agents has steadily declined due to the availability of more secure electronic lockboxes.Electronic lockboxes increase the level of security because agents wishing to show a property must have a valid electronic key to open the box. The electronic key must be renewed or refreshed at regular intervals by the agent otherwise the key deactivates itself preventing access to the lockbox contents. Electronic keys can range from credit card sized smart cards to a separate electronic box. In addition to greater security, electronic lockboxes typically record all key access activity internally. This access log can be downloaded and reviewed by the listing agent to determine the date, time and person accessing the lockbox. Electronic lockboxes also offer a host of other features such as controlling allowed showing times, homeowner privacy modes, special showing restrictions etc.
Shared commissions with co-op brokersIf any buyer's broker (or any of his/her agents) brings the buyer for the property, the buyer's broker would typically be compensated with a co-op commission coming from the total offered to the listing broker, often about half of the full commission from the seller. If an agent or salesperson working for the buyer's broker brings the buyer for the property, then the buyer's broker would commonly compensate his agent with a fraction of the co-op commission, again as determined in a separate agreement. A discount brokerage may offer a reduced commission in the event no other brokerage firm is involved and no co-op commission is paid out.If there is no co-commission to pay to another brokerage, the listing brokerage receives the full amount of the commission minus any other types of expenses.
Potential points of contention for agentsReal estate commissions are becoming a point of controversy. Home values in many areas have quadrupled over the past 20 years. This may be contributing to the increased number of licensed agents and growing competition between them. The number of real estate agents in areas tends to rise when home values do, and the productivity of existing agents goes down. The rewards have increased, but so have the demands of clients and business risks faced by agents. In North America, agents have had to become familiar with marketing through the internet as well as traditional print and other media. Additionally the law is complicated with issues such as defects in housing, grow houses and other issues of which the agent is the front line defense for his client. There is more liability than ever in advising buyers and sellers.Another controversy exists for the commissions to real estate agents. If a listing agent sells a property for any amount above the listed price, he in turn will make additional income. In theory, this will motivate him/her to get top dollar price for his client, the seller. However, if the agent representing the buyer attempts to obtain a lower sales price for his client, then he/she would make a lower commission. Thus, it could be considered to be in the agent's best interest to advise his client to purchase the property at a higher price.In practical terms, there is rarely a great enough difference between the listing (asking) price and the negotiated selling price to make a significant difference between the commissions generated on each side, and certainly hardly enough to justify an agent failing in his fiduciary duty to obtain the best terms for his/her client.Another potential conflict of interest exists when a listing agent in a very active real estate market has incentive to sell properties quickly at unnecessarily low prices in order to benefit from a high volume of sales.In any case, agents who create satisfied clients and develop subsequent referrals are likely to do far better in the long run.
Real estate brokers and buyers
Services provided to buyers:Buyers as clientsWith the increase in the practice of buyer brokerage in the US, especially since the late 1990s in most states, agents (acting under their brokers) have been able to represent buyers in the transaction with a written "Buyer Agency Agreement" not unlike the "Listing Agreement" for sellers referred to above. In this case, buyers are clients of the brokerage.Some real estate brokerages choose only to represent buyers in an exclusive buyer's agency relationship and do not take "listings" from sellers.A real estate brokerage attempts to do the following for the buyers of real estate only when they represent the buyers with some form of written buyer-brokerage agreement:Find real estate in accordance with the buyers needs, specifications, and cost.Takes buyers to and shows them properties available for sale.When deemed appropriate, prescreens buyers to ensure they are financially qualified to buy the properties shown (or uses a mortgage professional to do that task).Negotiates price and terms on behalf of the buyers and prepares standard real estate purchase contract by filling in the blanks in the contract form. The buyer's agent acts as a fiduciary for the buyer.Due to the importance of the role of representing buyers' interests, many brokers who seek to play the role of client advocate are now seeking out the services of Certified Mortgage Planners, industry experts that work in concert with Certified Financial Planners to align consumers' home finance positions with their larger financial portfolio(s).Buyers as customersIn most states, until the 1990s, buyers who worked with an agent of a real estate broker in finding a house were customers of the brokerage, since the broker represented only sellers.Today, state laws differ. Buyers and/or sellers may be represented. Typically, a written "Buyer Brokerage" agreement is required for the buyer to have representation (regardless of which party is paying the commission), although by his/her actions, an agent can create representation.Find real estate in accordance with the buyers’ needs, specifications, and affordability.Take buyers to and shows them properties available for sale.When deemed appropriate, prescreen buyers to ensure they are financially qualified to buy the properties shown (or uses a mortgage professional to do that task).Assist the buyer in making an offer for the property.
The impact of globalization on real estate brokers' activitiesGlobalization has had an immediate and powerful impact on real estate markets, making them an international working place. The rapid growth of the Internet has made the international market accessible to millions of consumers. A look at recent changes in homeownership rates illustrates this. Minority homeownership jumped by 4.4 million during the 1990s, reaching 12.5 million in 2000, according to the Fannie Mae Foundation. Foreign direct investment in U.S. real estate has increased sharply from $38 billion in 1997 more than $50 billion in 2002 according to Census data.Most local real estate agents view the foreign market as a significant revenue potential and may have already worked with international clients in their local market, new immigrants or more sophisticated investors from different cultures and from other countries. For example, they are providing value-added services to an overseas relocation employee figure out which inoculations his or her children will need as well as the steps needed to register a car in the United States. Real estate brokers want to keep central to the transaction, protect the best interests of their members and address the unique needs of each multicultural global client by acquiring specialized training and designations. (See below for more)Recently the Mexican association of real estate practitioners in Mexico, AMPI, and the NAR, National Association of Realtors in the US, signed a bilateral contract for international real estate business cooperation. Also at the local level, many other state and local associations are helping other countries achieve the same result. For instance, in New Mexico, a historically multicultural state, under the RANM, Realtor Association of New Mexico and the President’s Advisory Council, is looking into forming an ambassador association to help a foreign country into signing a bilateral agreement with the NAR. In New Mexico, there are 4500 licensed real estate professionals and only 14 or 15 CIPS designees, out of whom, only 6 speak a language other than English.
Real estate brokers / agents and further educationIn addition to completing the educational requirements for a state real estate license, most states issue real estate licenses for limited time periods and require real estate professionals to complete a certain number of hours of further education on an annual or biannual basis in order to renew their licenses.Required course hours range from 10 to 20 per license period. Typically, some specific courses are required to be taken; these would include real estate law updates.
NAR educational requirements and recognized designationsAs adherents to NAR's Code of Ethics, Realtors are required to update their acquaintance with the Code every 4 years by taking a course, available on-line or "live".However, Realtors, as members of NAR, also have the option of studying for additional certifications in a variety of specialties, several of which are backed by NAR with offerings of certification and update courses available nationwide .The most well known NAR sponsored designations are the following:Accredited Buyer Representative (ABR). The Real Estate Buyers Agent Council has over 40,000 members and is the largest association of real estate professionals focusing on all aspects of buyer representation. Of the REBAC members, over 30,000 have completed REBAC’s two-day course and provided documentation of buyer agency experience. Linked to the ABR is the ABRM, Accredited Buyer Representative Manager (ABRM) for managers.Accredited Land Consultant (ALC). ALC’s are the recognized experts in land brokerage transactions of all kinds of specialized land services including farms and ranches, raw land sales and development.Certified Commercial Investment Member (CCIM). CCIMs are recognized experts in commercial real estate brokerage, leasing, valuation and investment analysis. There are more than 7,500 designees and an equal number of candidates principally in North America, but also in Asia and Europe.Certified Property Manager (CPM). Geared to real estate property management specialists, designees handle all forms of management from residential to commercial to industrial.Certified Real Estate Brokerage Manager (CRB). The designation is awarded to REALTORS® who have completed the Council's advanced educational and professional requirements. CRB designees consistently increase their level of industry knowledge, advance their earning and career potential, increase their firm’s profitability and benefit from active involvement in our network of real estate professionals.Certified Residential Specialist (CRS). Designees, with 44,000 members - 4% of NAR members - who average 43 transactions per year and earn four times as much as the average Realtor, belong to the Council of Residential Specialists which is the largest affiliate of NAR. They are involved in over 27% of all transactions because the consumer prefers to work with a more knowledgeable and seasoned brokers or agents. Requirements for this designation include a total of at least 25 transactions (or specific $$ volume of sales) over a specific time period, significant experience, as well as complete rigorous educational requirements.Certification for Internet Professionalism (e-PRO). An e-PRO is a Realtor who has undergone a new training program presented entirely online in order to be certified as Internet Professionals. NAR is the first major trade group to offer certification for online professionalism which involves all aspects of doing business on the internet.Certified International Property Specialist (CIPS). Realtors with the CIPS designation have both hands-on experience in international real estate transactions, Whether traveling abroad to put transactions together, assisting foreign investors, helping local buyers invest abroad, or serving an immigrant niche in local markets. CIPS designees have also successfully completed an intensive program of study focusing on critical aspects of transnational transactions, including currency and exchange rate issues and cross-cultural relationships, regional market conditions, investment performance, tax issues and more. The CIPS network is comprised of 1,500 real estate professionals from 50 countries who deal in all types of real estate.Counselor of Real Estate (CRE). A CRE designee is one of only 1,100 by-invitation-only members of an international group of professionals who provide seasoned, objective advice on real property and land-related matters.Graduate of the REALTORs’ Institute (GRI). The GRI designation is held by 19% of Realtors and courses are offered through state Realtor Associations with 90 hours of coursework on marketing and servicing listed properties to real estate law. In a 2003 survey, NAR has determined that GRIs earned over $33,200 more annually than non-designees.Real Estate Professional Assistant (REPA). Designed for administrative assistants or employees of Realtors (who may or may not hold a real estate license), a two-day certificate course provides an intensive introduction to the real estate business and to the specific ways support staff can become valuable assets to their employers.
Success rateCompensation is typically based on a percentage of the sales price, split between the buying and selling brokers, and then between the agent(s) and his/her real estate agency. While a split based on the percentage received by the broker is generally normal, in some brokerages agents may pay a monthly "desk fee" for office costs, monthly fee, etc. and then retain 100% of the commission received.According to various trade journals such as Realty Times, the first year failure rate is over 86%, and for those brokers or agents who have survived, over 70% have an income less than $30,000. A National Association of Realtors survey found a median income in 2004 of $37,600 for agents, and $52,800 for brokers, though many top agents earn six-figure incomes. . Even for those who have survived for years, most earn a modest income comparable to that of the American middle class. However, many agents work only on a part-time basis.
British, French and Italian usages of the termIn British usage, however, “real property”, often shortened to just “property”, refers rather to land and fixtures as such while the term “real estate” is used mostly in the context of probate law, and means all interests in land held by a deceased person at death excluding interests in money arising under a trust for sale of or charged on land.In French, Italian and Spanish, real estate is called "immovables" (immobilier in French, immobili in Italian and inmueble in Spanish); other property is called "movables" (mobilier and mueble).
Business sectorWith the development of private property ownership, real estate has become a major area of business. Purchasing real estate requires a significant investment, and each parcel of land has unique characteristics, so the real estate industry has evolved into several distinct fields. Specialists are often called on to valuate real estate and facilitate transactions. Some kinds of real estate businesses include:Appraisal - Professional valuation servicesBrokerages - Assisting buyers and sellers in transactionsDevelopment - Improving land for use by adding or replacing buildingsProperty management - Managing a property for its owner(s)Real Estate Marketing - Managing the sales side of the property businessReal Estate Investing - Managing the investment of real estateRelocation services - Relocating people or business to a different countryWithin each field, a business may specialize in a particular type of real estate, such as residential, commercial, or industrial property. In addition, almost all construction business effectively has a connection to real estate."Internet Real Estate" is a term coined by the internet investment community relating to the parallel that exists between high quality internet domain names and real-world, prime real estate. Many internet companies actually use the address of properties as domain names.
LevelsAccording to The Economist, "developed economies'" assets at the end of 2002 wasResidential property: $48 trillionCommercial property: $14 trillionEquities: $20 trillionGovernment bonds: $20 trillionCorporate bonds: $13 trillionTotal: $115 trillionThat makes real estate assets 54% and financial assets 46% of total stocks, bonds, and real estate assets. Assets not counted here are bank deposits, insurance "reserve" assets, and human assets; also it is not clear if all debt and equity investments are counted in the categories equities and bonds. For US asset levels see FRB: Z.1 Release-- Flow of Funds Accounts of the United States.
Mortgages in real estateIn recent years, many economists have recognized that the lack of effective real estate laws can be a significant barrier to investment in many developing countries. In most societies, rich or poor, a significant fraction of the total wealth is in the form of land and buildings.In most advanced economies, the main source of capital used by individuals and small companies to purchase and improve land and buildings is mortgage loans (or other instruments). These are loans for which the real property itself constitutes collateral. Banks are willing to make such loans at favorable rates in large part because, if the borrower does not make payments, the lender can foreclose by filing a court action which allows them take back the property and sell it to get their money back. For investors, profitability can be enhanced by using an off plan or pre-construction strategy to purchase at a lower price which is often the case in the pre-construction phase of development.But in many developing countries there is no effective means by which a lender could foreclose, so the mortgage loan industry, as such, either does not exist at all or is only available to members of privileged social classes.
Real estate in Mexico and Central AmericaReal estate in Mexico and Central America is different from the way that it is conducted in the United States.Some similarities include a variety of legal formalities, (with professionals such as real estate agents generally employed to assist the buyer); taxes need to be paid (but typically less than those in U.S.); legal paperwork will ensure title; and a neutral party such as a title company will handle documentation and monies in order to smoothly make the exchange between the parties. Increasingly, US title companies are doing work for US buyers in Mexico and Central America.Prices are often much cheaper than most areas of the U.S., but in many locations prices of houses and lots are as expensive as the US, one example being Mexico City. U.S. banks have begun to give home loans for properties in Mexico, but, so far, not for other Central American countries.One important difference from the United States is that each country has rules regarding where foreigners can buy. For example, in Mexico, they cannot buy land or homes within 50km of the coast or 100km from a border, while, in Honduras, they may buy beach front property. There are also different special rules regarding certain types of property: ejidos - communally held farm property - cannot be sold to anyone, but that does not prevent them from being offered for sale.Many websites advertising and selling Mexican and Central American real estate exist, but they may need to be researched.
Real estate brokerFrom Wikipedia, the free encyclopediaJump to: navigation, searchA real estate broker is a party who acts as an intermediary between sellers and buyers of real estate and attempts to find sellers who wish to sell and buyers who wish to buy. In the United States, the relationship was originally established by reference to the English common law of agency with the broker having a fiduciary relationship with his clients. Estate agent is the term used in the United Kingdom to describe a person or organization whose business is to market real estate on behalf of clients.In the US, real estate brokers and their salespersons (commonly called "real estate agents" or, in some states, "brokers")[1] assist sellers in marketing their property and selling it for the highest possible price under the best terms. When acting as a Buyer's agent with a signed agreement (or, in many cases, verbal agreement, although a broker may not be legally entitled to his commission unless the agreement is in writing), they assist buyers by helping them purchase property for the lowest possible price under the best terms. Without a signed agreement, brokers may assist buyers in the acquisition of property but still represent the seller and the seller's interests.In most jurisdictions in the United States, a person is required to have a license in order to receive remuneration for services rendered as a real estate broker. Unlicensed activity is illegal, but buyers and sellers acting as principals in the sale or purchase of real estate are not required to be licensed. In some states, lawyers are allowed to handle real estate sales for compensation without being licensed as brokers or agents
The difference between salespersons and brokers
In the past, when brokers (and their agents) only represented sellers, the term ‘’real estate salesperson’’ may have been more appropriate than it is today, given the different ways that brokers and their agents can help a buyer through the process rather than simply “sell’’ him or her a property. Legally however, the term 'salesperson' is still used in many states to describe a real estate agent.Real estate education: In order to become licensed, most states require that an applicant take a minimum number of classes before taking the state licensing exam. Such education is often provided by real estate brokerages as a means to finding new agents.Today in many states, the real estate agent (acting as an agent of the broker with whom he/she is employed) is required to disclose to prospective buyers and sellers who represents whom. See below for a broker/agent’s relationship to sellers and their relationship to buyers.While some people may refer to any licensed real estate agent as a real estate broker, a licensed real estate agent is a professional who has obtained either a real estate salesperson's license or a real estate broker's license.In the United States, there are commonly two levels of real estate professionals licensed by the individual states, but not by the federal government:Real estate salesperson (or, in some states, Real estate broker): When a person first becomes licensed to become a real estate agent, he/she obtains a real estate salesperson's license (or some states use the alternative term, "broker") from the state in which he/she will practice. To obtain a real estate license, the candidate must take specific coursework (of between 40 and 90 hours) and then pass a state exam on real estate law and practice. In order to work, salespersons must then be associated with (and act under the authority of) a real estate broker.Many states also have reciprocal agreements with other states, allowing a licensed individual from a qualified state to take the second state's exam without completing the course requirements, or, in some cases, take only a state law exam.Real estate broker (or, in some states, Qualifying Broker):After gaining some years of experience in real estate sales, a salesperson may decide to become licensed as a real estate broker (or Principal/Qualifying broker) in order to own, manage or operate his/her own brokerage. Commonly more course work and a broker's state exam on real estate law must be passed. Upon obtaining a broker's license, a real estate agent may continue to work for another broker in a similar capacity as before (often referred to as a broker associate or associate broker) or take charge of his/her own brokerage and hire other salespersons (or broker) licensees. Becoming a branch office manager may or may not require a broker's license. Some states such as New York allow licensed attorneys to become real estate brokers without taking any exam. In states, such as Colorado, there are no "salespeople", as all licensees are Brokers.A REALTOR, pronounced “Real-tor” (re??l tor), is a real estate salesperson or broker who is a member of the National Association of Realtors (NAR). All Realtors are brokers/salespersons, but not all brokers/salespersons are Realtors.
Agency relationships with clients versus Non-Agency relationships with customersAgency relationship: Traditionally, the broker provides a conventional full-service, commission-based brokerage relationship under a signed listing agreement with a seller or "buyer representation" agreement with a buyer, thus creating under common law in most states an agency relationship with fiduciary obligations. The seller or buyer is then a client of the broker. Some states also have statutes which define and control the nature of the representation.Agency relationships in residential real estate transactions involve the legal representation by a real estate broker (on behalf of a real estate company) of the principal, whether that person or persons is a buyer or a seller. The broker (and his/her licensed real estate agents) then becomes the agent of the principal.Non-agency relationship: where no written agreement nor fiduciary relationship exists, a real estate broker (and his agents) works with a principal who is then known as the broker’s customer. When a buyer, who has not entered into a Buyer Agency agreement with the broker and buys a property, then that broker functions as the sub-agent of the seller’s broker. When a seller chooses to work with a transaction broker, there is no agency relationship created.
Transaction brokersSome state Real Estate Commissions, notably Florida's after 1992 (and extended in 2003) and Colorado's after 1994 (with changes in 2003), created the option of having no agency nor fiduciary relationship between brokers and sellers or buyers. The transaction broker assists buyers, sellers, or both during the transaction without representing the interests of either party. They may be then regarded as customers.As noted by the South Broward Board of Realtors, Inc. in a letter to State of Florida legislative committees :"The Transaction Broker crafts a transaction by bringing a willing buyer and a willing seller together and assists with the closing of details. The Transaction Broker is not a fiduciary of any party, but must abide by law as well as professional and ethical standards." (such as NAR Code of Ethics)The result was that in 2003, Florida created a system where the default brokerage relationship had "all licensees …operating as transaction brokers, unless a single agent or no brokerage relationship is established, in writing, with the customer" and the statute required written disclosure of the transaction brokerage relationship to the buyer or seller customer only through July 1, 2008.In both Florida and Colorado's case, dual agency and sub-agency (where both listing and selling agents represented the seller) no longer exist.
Dual or limited AgencyDual agency occurs when the same brokerage represents both the seller and the buyer under written agreements. Individual state laws vary and interpret dual agency rather differently.Many states no longer allow dual agency. Instead, Transaction Brokerage (see above) provides the Buyer and Seller with a limited form of representation, but without any fiduciary obligations (see Florida law). Buyers and sellers are generally advised to consult a licensed real estate professional for a written definition of an individual state's laws of agency, and many states require written Disclosures to be signed by all parties outlining the duties and obligations.If state law allows for the same agent to represent both the buyer and the seller in a single transaction, the brokerage/agent is typically considered to be a Dual Agent. Special laws/rules often apply to dual agents, especially in negotiating price.In some states (notably Maryland[8]), Dual Agency can be practiced in situations where the same brokerage (but not agent) represent both the buyer and the seller. If one agent from the brokerage has a home listed and another agent from that brokerage has a buyer-brokerage agreement with a buyer who wishes to buy the listed property, Dual Agency occurs by allowing each agent to be designated as “intra-company” agent. Only the broker himself is the Dual Agent.Some states do allow a broker and one agent to represent both sides of the transaction as dual agents. In those situations, conflict of interest is more likely to occur.
Types of services that a broker can provideSince each state's laws may differ from others, it is generally advised that prospective sellers or buyers consult a licensed real estate professional.Some Examples:Comparative Market Analysis - an estimate of the home's value compared with others. This differs from an appraisal in that property currently for sale may be taken into consideration (competition for the subject property).Exposure - Marketing the real property to prospective buyers.Facilitating a Purchase - guiding a buyer through the process.Facilitating a Sale - guiding a seller through the selling process.FSBO document preparation - preparing necessary paperwork for "Sale By Owner" sellers.Full Residential Appraisal - but only, in most states, if the broker is also licensed as an appraiser.Home Selling Kits - guides to how to market and sell a property.Hourly Consulting for a fee, based on the client's needs.Leasing for a fee or percentage of the gross lease value.Property Management.Exchanging property.Auctioning property.Preparing contracts and leases. (Not in all states.)
GeneralThe sellers and buyers themselves are the principals in the sale, and real estate brokers (and the broker's agents) are their agents as defined in the law. However, although a real estate agent commonly fills out the real estate contract form, agents are typically not given power of attorney to sign the real estate contract or the deed; the principals sign these documents. The respective real estate agents may include their brokerages on the contract as the agents for each principal.The use of a real estate broker is not a requirement for the sale or conveyance of real estate or for obtaining a mortgage loan from a lender. However, once a broker is used, the settlement attorney (or party handling closing) will ensure that all parties involved be paid. Lenders typically have other requirements, though, for a loan.
Services provided to both buyers and sellersIn addition to the services to sellers and buyers described below, most real estate agents coordinate various aspects of the closing.Real estate brokers (and their agents) typically do not provide title service such as title search or title insurance, do not conduct surveys or formal appraisals of the property such as those required by lenders, and do not act as lawyers for the parties, although they may "coordinate" these activities with the appropriate specialists. Some real estate brokers may be associated with loan officers who may help to finance buyers to make their purchase.Regardless of whether a real estate agent assists sellers or buyers of real estate, negotiation and financing skills are important.
Real estate brokers and sellers
Services provided to seller as clientUpon signing a listing contract with the seller wishing to sell the real estate, the brokerage attempts to earn a commission by finding a buyer for the sellers' property for highest possible price on the best terms for the seller. In Canada, most provinces' laws require the real estate agent to forward all written offers to the seller for consideration or review.To help accomplish this goal of finding buyers, a real estate agency commonly does the following:Listing the property for sale to the public, often on a Multiple Listing Service, in addition to any other methods.Based on the law in several states, providing the seller with a real property condition disclosure form, and other forms which may be needed.Preparing necessary papers describing the property for advertising, pamphlets, open houses, etc.Generally placing a "For Sale" sign on the property indicating how to contact the real estate office and agent.Advertising the property. Advertising is often the biggest outside expense in listing a property.In some cases, holding an Open house to show the property.Being a contact person available to answer any questions about the property and to schedule showing appointmentsEnsuring buyers are prescreened so that they are financially qualified to buy the property; the more highly financially qualified the buyer is, the more likely the closing will succeed.Negotiating price on behalf of the sellers. The seller's agent acts as a fiduciary for the seller. This may involve preparing a standard real estate purchase contract by filling in the blanks in the contract form.In some cases, holding an earnest payment cheque in escrow from the buyer(s) until the closing. In many states, the closing is the meeting between the buyer and seller where the property is transferred and the title is conveyed by a deed. In other states, especially those in the West, closings take place during a defined escrow period when buyers and sellers each sign the appropriate papers transferring title, but do not meet each other.
The "listing" contractSeveral types of listing contracts exist between broker and seller. These may be defined as:Exclusive Right to SellIn this type of Agreement", the broker is given the exclusive right to market the property and represents the seller exclusively. However, the brokerage also offers to co-operate with other brokers and agrees to allow them to show the property to prospective buyers and offers a share of the total real estate commission.Exclusive AgencyAn alternative form, "Exclusive Agency", allows only the broker the right to sell the property, and no offer of compensation is ever made to another broker. In that case, the property will never be entered into an MLS. Naturally, that limits the exposure of the property to only one agency.Open ListingThis is an Agreement whereby the property is available for sale by any real estate professional who can advertise, show, or negotiate the sale. Whoever first brings an acceptable offer would receive compensation. Real estate companies will typically require that a written agreement for an open listing be signed by the seller to ensure the payment of a commission if a sale should take place.Although there can be other ways of doing business, a real estate brokerage usually earns its commission after the real estate broker and a seller enter into a listing contract and fulfill agreed-upon terms specified within that contract. The seller's real estate is then listed for sale, frequently with property data entered into a Multiple Listing Service (MLS) in addition to any other ways of advertising or promoting the sale of the property.In most of North America, where brokers are members of a national association (such as NAR in the United States or the Canadian Real Estate Association), a listing agreement or contract between broker and seller must include the following: starting and ending dates of the agreement; the price at which the property will be offered for sale; the amount of compensation due to the broker and how much, if any, will be offered to a co-operating broker who may bring a buyer. Without an offer of compensation to a co-operating broker (co-op percentage or flat fee), the property may not be advertised in the MLS system.
Brokerage commissionsIn consideration of the brokerage successfully finding a satisfactory buyer for the property, a broker anticipates receiving a commission for the services the brokerage has provided. Usually, the payment of a commission to the brokerage is contingent upon finding a satisfactory buyer for the real estate for sale, the successful negotiation of a purchase contract between a satisfactory buyer and seller, or the settlement of the transaction and the exchange of money between buyer and seller.In North America a commission in the 5% to 7% range is considered "standard" for residential real estate and is typically paid by the seller at the closing of the transaction. Commissions are negotiable between seller and broker. The commission could also be paid as flat fee or some combination of flat fee and percentage, particularly in the case of lower-priced properties, vacant lots, or other unusual real estate. The details are determined by the listing contract.However, some brokers charge as much as 10% while others will offer services for 1%. Fee-for-service or flat-fee real estate brokerages are also increasing in popularity. This is not, however, the norm throughout the world. In Australia, for example, listing agents are paid between 2-4% and very few buyers use an agent. If they do, they pay out-of-pocket.Out of the commission received from the seller, the broker will typically pay any expenses incurred in doing the work of trying to sell the listed properties, such as advertisements, etc.Real estate brokers who work with lenders may not receive any compensation from the lender for referring a client to a specific lender. To do so would be a violation of a (US) federal law known as the Real Estate Settlement Procedures Act (RESPA). All compensation to a broker must be disclosed to all parties.
LockboxWith the sellers’ permission, a lockbox is placed on homes that are occupied and, after arranging an appointment with the home owner, agents can show the home. When a property is vacant or where a seller may be living elsewhere, a lockbox will generally be placed on the front door. The listing broker helps arrange showings of the property by various real estate agents from all companies associated with the MLS.The lockbox contains the key to the door of the property and the box can only be opened by licensed real estate agents (often only with authorization from the listing brokerage), by using some sort of secret combination or code provided by the brokerage or the issuer of the lockbox.Lockboxes come in two varieties - mechanical and electronic. Mechanical lockboxes utilize a combination dial or special mechanical key and are readily purchased at local home improvement centers or over the internet. Mechanical lockboxes offer the most basic protection of the homeowner's key and therefore expose the most risk of unmonitored or potentially unauthorized access to the home during the sales process. The risk stems primarily from an agent forgetting to change the combination after each sale. The frequency of use of mechanical lockboxes by agents has steadily declined due to the availability of more secure electronic lockboxes.Electronic lockboxes increase the level of security because agents wishing to show a property must have a valid electronic key to open the box. The electronic key must be renewed or refreshed at regular intervals by the agent otherwise the key deactivates itself preventing access to the lockbox contents. Electronic keys can range from credit card sized smart cards to a separate electronic box. In addition to greater security, electronic lockboxes typically record all key access activity internally. This access log can be downloaded and reviewed by the listing agent to determine the date, time and person accessing the lockbox. Electronic lockboxes also offer a host of other features such as controlling allowed showing times, homeowner privacy modes, special showing restrictions etc.
Shared commissions with co-op brokersIf any buyer's broker (or any of his/her agents) brings the buyer for the property, the buyer's broker would typically be compensated with a co-op commission coming from the total offered to the listing broker, often about half of the full commission from the seller. If an agent or salesperson working for the buyer's broker brings the buyer for the property, then the buyer's broker would commonly compensate his agent with a fraction of the co-op commission, again as determined in a separate agreement. A discount brokerage may offer a reduced commission in the event no other brokerage firm is involved and no co-op commission is paid out.If there is no co-commission to pay to another brokerage, the listing brokerage receives the full amount of the commission minus any other types of expenses.
Potential points of contention for agentsReal estate commissions are becoming a point of controversy. Home values in many areas have quadrupled over the past 20 years. This may be contributing to the increased number of licensed agents and growing competition between them. The number of real estate agents in areas tends to rise when home values do, and the productivity of existing agents goes down. The rewards have increased, but so have the demands of clients and business risks faced by agents. In North America, agents have had to become familiar with marketing through the internet as well as traditional print and other media. Additionally the law is complicated with issues such as defects in housing, grow houses and other issues of which the agent is the front line defense for his client. There is more liability than ever in advising buyers and sellers.Another controversy exists for the commissions to real estate agents. If a listing agent sells a property for any amount above the listed price, he in turn will make additional income. In theory, this will motivate him/her to get top dollar price for his client, the seller. However, if the agent representing the buyer attempts to obtain a lower sales price for his client, then he/she would make a lower commission. Thus, it could be considered to be in the agent's best interest to advise his client to purchase the property at a higher price.In practical terms, there is rarely a great enough difference between the listing (asking) price and the negotiated selling price to make a significant difference between the commissions generated on each side, and certainly hardly enough to justify an agent failing in his fiduciary duty to obtain the best terms for his/her client.Another potential conflict of interest exists when a listing agent in a very active real estate market has incentive to sell properties quickly at unnecessarily low prices in order to benefit from a high volume of sales.In any case, agents who create satisfied clients and develop subsequent referrals are likely to do far better in the long run.
Real estate brokers and buyers
Services provided to buyers:Buyers as clientsWith the increase in the practice of buyer brokerage in the US, especially since the late 1990s in most states, agents (acting under their brokers) have been able to represent buyers in the transaction with a written "Buyer Agency Agreement" not unlike the "Listing Agreement" for sellers referred to above. In this case, buyers are clients of the brokerage.Some real estate brokerages choose only to represent buyers in an exclusive buyer's agency relationship and do not take "listings" from sellers.A real estate brokerage attempts to do the following for the buyers of real estate only when they represent the buyers with some form of written buyer-brokerage agreement:Find real estate in accordance with the buyers needs, specifications, and cost.Takes buyers to and shows them properties available for sale.When deemed appropriate, prescreens buyers to ensure they are financially qualified to buy the properties shown (or uses a mortgage professional to do that task).Negotiates price and terms on behalf of the buyers and prepares standard real estate purchase contract by filling in the blanks in the contract form. The buyer's agent acts as a fiduciary for the buyer.Due to the importance of the role of representing buyers' interests, many brokers who seek to play the role of client advocate are now seeking out the services of Certified Mortgage Planners, industry experts that work in concert with Certified Financial Planners to align consumers' home finance positions with their larger financial portfolio(s).Buyers as customersIn most states, until the 1990s, buyers who worked with an agent of a real estate broker in finding a house were customers of the brokerage, since the broker represented only sellers.Today, state laws differ. Buyers and/or sellers may be represented. Typically, a written "Buyer Brokerage" agreement is required for the buyer to have representation (regardless of which party is paying the commission), although by his/her actions, an agent can create representation.Find real estate in accordance with the buyers’ needs, specifications, and affordability.Take buyers to and shows them properties available for sale.When deemed appropriate, prescreen buyers to ensure they are financially qualified to buy the properties shown (or uses a mortgage professional to do that task).Assist the buyer in making an offer for the property.
The impact of globalization on real estate brokers' activitiesGlobalization has had an immediate and powerful impact on real estate markets, making them an international working place. The rapid growth of the Internet has made the international market accessible to millions of consumers. A look at recent changes in homeownership rates illustrates this. Minority homeownership jumped by 4.4 million during the 1990s, reaching 12.5 million in 2000, according to the Fannie Mae Foundation. Foreign direct investment in U.S. real estate has increased sharply from $38 billion in 1997 more than $50 billion in 2002 according to Census data.Most local real estate agents view the foreign market as a significant revenue potential and may have already worked with international clients in their local market, new immigrants or more sophisticated investors from different cultures and from other countries. For example, they are providing value-added services to an overseas relocation employee figure out which inoculations his or her children will need as well as the steps needed to register a car in the United States. Real estate brokers want to keep central to the transaction, protect the best interests of their members and address the unique needs of each multicultural global client by acquiring specialized training and designations. (See below for more)Recently the Mexican association of real estate practitioners in Mexico, AMPI, and the NAR, National Association of Realtors in the US, signed a bilateral contract for international real estate business cooperation. Also at the local level, many other state and local associations are helping other countries achieve the same result. For instance, in New Mexico, a historically multicultural state, under the RANM, Realtor Association of New Mexico and the President’s Advisory Council, is looking into forming an ambassador association to help a foreign country into signing a bilateral agreement with the NAR. In New Mexico, there are 4500 licensed real estate professionals and only 14 or 15 CIPS designees, out of whom, only 6 speak a language other than English.
Real estate brokers / agents and further educationIn addition to completing the educational requirements for a state real estate license, most states issue real estate licenses for limited time periods and require real estate professionals to complete a certain number of hours of further education on an annual or biannual basis in order to renew their licenses.Required course hours range from 10 to 20 per license period. Typically, some specific courses are required to be taken; these would include real estate law updates.
NAR educational requirements and recognized designationsAs adherents to NAR's Code of Ethics, Realtors are required to update their acquaintance with the Code every 4 years by taking a course, available on-line or "live".However, Realtors, as members of NAR, also have the option of studying for additional certifications in a variety of specialties, several of which are backed by NAR with offerings of certification and update courses available nationwide .The most well known NAR sponsored designations are the following:Accredited Buyer Representative (ABR). The Real Estate Buyers Agent Council has over 40,000 members and is the largest association of real estate professionals focusing on all aspects of buyer representation. Of the REBAC members, over 30,000 have completed REBAC’s two-day course and provided documentation of buyer agency experience. Linked to the ABR is the ABRM, Accredited Buyer Representative Manager (ABRM) for managers.Accredited Land Consultant (ALC). ALC’s are the recognized experts in land brokerage transactions of all kinds of specialized land services including farms and ranches, raw land sales and development.Certified Commercial Investment Member (CCIM). CCIMs are recognized experts in commercial real estate brokerage, leasing, valuation and investment analysis. There are more than 7,500 designees and an equal number of candidates principally in North America, but also in Asia and Europe.Certified Property Manager (CPM). Geared to real estate property management specialists, designees handle all forms of management from residential to commercial to industrial.Certified Real Estate Brokerage Manager (CRB). The designation is awarded to REALTORS® who have completed the Council's advanced educational and professional requirements. CRB designees consistently increase their level of industry knowledge, advance their earning and career potential, increase their firm’s profitability and benefit from active involvement in our network of real estate professionals.Certified Residential Specialist (CRS). Designees, with 44,000 members - 4% of NAR members - who average 43 transactions per year and earn four times as much as the average Realtor, belong to the Council of Residential Specialists which is the largest affiliate of NAR. They are involved in over 27% of all transactions because the consumer prefers to work with a more knowledgeable and seasoned brokers or agents. Requirements for this designation include a total of at least 25 transactions (or specific $$ volume of sales) over a specific time period, significant experience, as well as complete rigorous educational requirements.Certification for Internet Professionalism (e-PRO). An e-PRO is a Realtor who has undergone a new training program presented entirely online in order to be certified as Internet Professionals. NAR is the first major trade group to offer certification for online professionalism which involves all aspects of doing business on the internet.Certified International Property Specialist (CIPS). Realtors with the CIPS designation have both hands-on experience in international real estate transactions, Whether traveling abroad to put transactions together, assisting foreign investors, helping local buyers invest abroad, or serving an immigrant niche in local markets. CIPS designees have also successfully completed an intensive program of study focusing on critical aspects of transnational transactions, including currency and exchange rate issues and cross-cultural relationships, regional market conditions, investment performance, tax issues and more. The CIPS network is comprised of 1,500 real estate professionals from 50 countries who deal in all types of real estate.Counselor of Real Estate (CRE). A CRE designee is one of only 1,100 by-invitation-only members of an international group of professionals who provide seasoned, objective advice on real property and land-related matters.Graduate of the REALTORs’ Institute (GRI). The GRI designation is held by 19% of Realtors and courses are offered through state Realtor Associations with 90 hours of coursework on marketing and servicing listed properties to real estate law. In a 2003 survey, NAR has determined that GRIs earned over $33,200 more annually than non-designees.Real Estate Professional Assistant (REPA). Designed for administrative assistants or employees of Realtors (who may or may not hold a real estate license), a two-day certificate course provides an intensive introduction to the real estate business and to the specific ways support staff can become valuable assets to their employers.
Success rateCompensation is typically based on a percentage of the sales price, split between the buying and selling brokers, and then between the agent(s) and his/her real estate agency. While a split based on the percentage received by the broker is generally normal, in some brokerages agents may pay a monthly "desk fee" for office costs, monthly fee, etc. and then retain 100% of the commission received.According to various trade journals such as Realty Times, the first year failure rate is over 86%, and for those brokers or agents who have survived, over 70% have an income less than $30,000. A National Association of Realtors survey found a median income in 2004 of $37,600 for agents, and $52,800 for brokers, though many top agents earn six-figure incomes. . Even for those who have survived for years, most earn a modest income comparable to that of the American middle class. However, many agents work only on a part-time basis.
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