I agree with what several others have said. from the seller's standpoint, they want the best price they can get for the house, and a good realtor should be working for them to sell the house. In theory, the percentage they make is made up for getting more than if the seller sold it themselves. The incentive for the realtor is to sell it at the best possible profit so s/he can make a larger commission.
For you to charge anything other than for professional expertise is wrong. You charge what you are worth and Larry's "value" concept. For you to make more money if the house sells and for however much the house sells for is incentive for you to be biased in your fact-findings. You don't want that to be a factor in court or anywhere else to compromise your professionalism.
You want to make money based on the value of the house and based on a percentage of what it sells for, you need to become a realtor and you need to learn how to market houses so that you can provide value to the seller in such a way that they are happy to pay you a percentage of the selling price.
I've bought homes both through a realtor and FSBO (for sale by owner).
For the seller and buyer perspective, the challenge is getting enough eyeballs to see the FSBO on the market. Realtors have the MLS locked up, but I think it's just a matter of time before that breaks down.
The only value I saw in a realtor from a buyer perspective is understanding the local area if I don't know it. But with basic internet search, I could figure out the right area and the school district I want to live in.
When I bought the FSBO, I offered to pay a realtor a flat $2,000 to manage the sale paperwork. He took it. It saved me $20,000 since there was no realtor on either side.
A mortgage agent will help guide you through the loan process. Title company will guide you through closing.
Basically, you're paying the realtor 6% to hold your hand on stuff you can deal with yourself if you put a little time into it.
> It was my experience in trying to sell a house myself that the problem wasn't the basic information flow about the house. You might find somebody who wanted the house, but they were scared or unable to figure out the process.
>
> Most buyers need an "expert" to hold their hand and guide them. The average buyer doesn't know how much of a mortgage they will be able to get, what info to take to the bank, how to deal with title insurance (or in Iowa an attorney's opinion on the abstract of title), etc. Even though the agent's primary duty is to the seller, the buyers feel like the agent is their best friend.
>
> The seller also needs to know a lot of this stuff to go without an agent. Groundwater Hazard Statement? Discosure of any Radon testing? Probably a lot of other required forms, by now. Unless the seller is very knowledgeable about the current "how it's done" process, he isn't going to sell the house without the real estate person.
Wise words. I'll go further and say that I'll charge different prices to different clients depending on how I think they perceive our value.
Some will pay a premium for our knowledge. Some don't value it as much. Those are two different price structures. Sometimes I want the business of those who don't value us as much because I see the opportunity to learn something new so I charge them less.
There's no way I would ever use a cost-plus model as we wouldn't make nearly the money we make nor would we would have been able to open the new business doors we have.
> > Your costs for providing your services to a client should be based on the costs you incur plus something for a profit. Your client needs to know the value of your service to them so they can understand what he/she is actually paying for.
>
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> With all due respect this is the sort of thinking that has brought us to where we are today. Please, please, please we must abandon this logic in favor of something new.
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> Your clients do not care about your costs. They only care about their perception of the value they will be receiving. There are no "magic numbers" that can be multiplied by this cost factor or that cost factor. Your costs are irrelevant.
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> Instead we must focus on the client. Focus on what they value and find ways to create more of that value. Once we begin to view things from that prospective we will be free to capture a fair portion of the value we create.
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> For a step by step guide to how to do this, see the series of articles in POB.
>
> Larry P
:good: :good: :good:
We sold our last house as FSBO. With a little research it was easy. The biggest problem was getting people to the door (this was before the internet explosion). Once I had a buyer on line, the title company made sure all of the paper work was up to par.
The house we bought was through a realtor, the seller had just put the house on the market the day we saw it. It was not even on the list yet, we just saw the sign as we passed by. At closing we found that some of the inspection items had not been repaired per our contract and we lost our loan lock. Luck for us (and the sellers agent) we the rates did not change. The seller was out of town and her agent had not done her job but still got her fee for doing absolutely nothing.
:good:
Realtor quality, like anything else, is a gamble. It doesn't take much to earn a license to sell real estate. That's why there are so many of them and the quality is so variable.
Some buyers think "it doesn't cost me anything to use a realtor because the seller pays those fees". Wrong, the seller builds the 6% fee into the selling price of the house. The seller knows if they list it for $295,000, the net is less $17,700 after realtor fees so you know the seller willing to take $277,300 before the bargaining starts, if a realtor is not in the middle.
> :good: :good: :good:
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> We sold our last house as FSBO. With a little research it was easy. The biggest problem was getting people to the door (this was before the internet explosion). Once I had a buyer on line, the title company made sure all of the paper work was up to par.
>
> The house we bought was through a realtor, the seller had just put the house on the market the day we saw it. It was not even on the list yet, we just saw the sign as we passed by. At closing we found that some of the inspection items had not been repaired per our contract and we lost our loan lock. Luck for us (and the sellers agent) we the rates did not change. The seller was out of town and her agent had not done her job but still got her fee for doing absolutely nothing.
link to articles please
please post a link to the articles referenced
thanks for your help
link to articles please
Here's a link to a list of articles by Larry Phipps:
http://www.pobonline.com/authors/2576-larry-phipps-pls/articles
The series appears to be called "Value Pricing."
Melita
link to articles please
thank youo very much
link to articles please
Thank you melita. I didn't have a link.