The False Promise of Open Houses

I sometimes work with sellers who want me to hold open houses.

I have learned, over many years, that open houses can be good (for the listing agent).

The dirty little secret of open houses is that they make a seller feel good, but they amount to a listing agent using the seller’s home as “bait” to attract other potential clients.

Open house visitors can be potential buyers who have yet to connect with a buyer’s agent, or neighbors who are thinking about selling and trying to figure out what their home is worth.

Sometimes, open house visitors are nosy neighbors eager to compare the seller’s home to theirs and see how they live.

And, there are the open house visitors who watch too much HGTV and are looking for decorating ideas on a Sunday afternoon.

Some agents even mail open house invitations to a seller’s entire subdivision, hoping to meet potential sellers and secure future listings.

Potential buyers who visit open houses are usually in the early stages of the buying process.

They often haven’t signed a buyer representation agreement with a buyer’s agent, haven’t obtained financing approval, and may even have a home to sell before they can buy.

In other words, they aren’t real buyers and may never become real buyers.

They’re lookers, not buyers.

Open houses can be effective in a new home subdivision with several homes for sale, but they are seldom effective with resale homes.

The bottom line?

Open houses account for a tiny fraction of all resale home sales.

Real buyers are already working with a buyer’s agent and not driving all over town on their own.

The real winner with an open house is the agent holding the open house.

 

Why I Practice Transparent Real Estate

I have long practiced what I call transparent real estate.

I reveal everything (good and bad) to my clients so they can “see through” their transaction with full disclosure and all facts on the table.

If you ask my clients, they will all tell you that I’m their trusted advisor; not someone who’s focused upon “closing the sale” or “getting the listing”.

I don’t persuade my clients to do what’s best for me; I advise them so they can make their own informed decisions.

Allowing my clients to “own” their own decisions also relieves me of the burden of having to convince them and keep them excited until closing.

My clients hear the truth about all aspects of their proposed transaction without enduring the usual sales persuasion tactics.

If challenges arise during the course of the transaction, I share my concerns with my clients instead of concealing them and hoping everything works out.

It’s a lot easier to work with clients who are motivated and capable than it is to spend my time trying to convince (“close”) unmotivated prospects to act.

And, it tends to result in a very high percentage of closings vs. sales falling through.

It’s a very rare event for me to have a listing that doesn’t sell or a transaction that falls through.

 

Boise Home Inspections

Most Boise home sales include a home inspection.

In the Boise real estate market, the buyers typically pay for a home inspection that’s done by an inspector of their choosing.

The cost for a home inspection is often $300, or more, depending upon the size of the home and the scope of the inspection.

After the inspection, the inspector will prepare a report with his findings and deliver it to the buyers and their agent.

If there are no significant defects, the transaction will proceed normally.

If the inspection reveals items needing repair, the buyers will have the option of asking the sellers (in writing) to repair those items.

The sellers can agree to complete the requested repairs, in which case the transaction will proceed normally.

If the buyers and sellers can’t agree on repair issues, the buyers can cancel the transaction and receive a refund of their earnest money.

Some sellers opt to have their home “pre-inspected” by a home inspector of their own choosing prior to listing their home.

A pre-inspection report, combined with paid repair receipts, can be used as an effective marketing tool.

When sellers have their home pre-inspected, the buyers still have the option of having the home inspected by their own home inspector.

It’s important to understand that home inspectors aren’t licensed in Idaho.

That means that each home inspector can approach inspections differently.

Note: This is a simple explanation of a complex issue.  For additional insights on home inspection issues, please call me at (208)938-5533 or e-mail me.

 

The Truth About Million Dollar Producers

Ever noticed those Realtors® driving around with “Million Dollar Producer” license frames on their cars?

Well, here’s the truth about those million dollar producers.

Selling $1 million of real estate isn’t all it’s cracked up to be.

Here’s why:

First, you multiply that $1 million of sales volume by the commission rate for the agent.

Assuming two agents in a transaction (one representing the seller; the other representing the buyer) who equally share a 6% commission, each agent receives a 3% commission.

3% X $1 million sales volume= $30,000 gross commission.

Then, the agent usually “splits” that gross commission with their broker, so we need to multiply that $30,000 by the percentage of commission the agent keeps.

Let’s assume that the agent is on a 65% “split”, which leaves $19,500 for the agent after giving up $10,500 (35%) for their broker.

This is actually a high commission split because many new agents start out with a 50/50 split with their brokers.

Then, the agent gets to pay their own expenses, including MLS dues, Realtor® dues, E&O insurance, health insurance, car payments, car insurance, gas, car maintenance, advertising, signs, telephone, website hosting, etc.

It’s pretty common for business expenses to run around 40% of commission income, which leaves an estimated net income of less than $12,000.

That’s equal to the 2014 poverty level for a one-person household, according to HHS guidelines.

As you can see, being a million-dollar producer is more of an embarrassment than something to brag about.

If an agent is only a million dollar producer, it might be a good idea to keep it a secret.

 

10 Tips For Mortgage Approval Success

Most real estate transactions depend upon mortgage approval.

Here are 10 helpful tips for mortgage approval success.

  1. Don’t make large deposits into your bank accounts. Most lenders will require 30-60 days’ of bank statements and want to know the source of deposited funds.
  2. Use your own money for the down payment. Your lender will want to ensure that your down payment came from you and that you didn’t borrow it.
  3. Fully disclose past financial problems, including foreclosure, short sale, or bankruptcy.
  4. Disclose changes in employment.  Lenders prefer two years’ continuous employment in the same line of work, but can make exceptions with adequate documentation.
  5. Disclose alimony and/or child support.  These payments will be considered as expenses against your income for loan qualification.
  6. Disclose any relationship you may have with the seller of the property to avoid the appearance of loan fraud.
  7. Do not shop for additional credit until after closing. More than one loan approval has been destroyed by a buyer financing a house full of furniture or that beautiful new Escalade before closing.
  8. File your tax returns on time.  Lenders are skeptical of borrowers who file extensions every year; especially if they owe unpaid taxes.
  9. Disclose any ownership in the company that employs you.  Self-employed borrowers undergo far greater scrutiny than borrowers with regular paychecks.
  10. Disclose all pertinent information to your lender.  It’s not good when the underwriter discovers things you “forgot” to mention on your application.