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Transcript:
I want to talk about two topics today. One is how to confirm your commission when you’re a buyer’s agent making an offer the other is about the growing epidemic in real estate of text messages. I’ll start there because I think text messaging and real estate has gotten out of control text messages should be short concise and informative so if you talk to another agent and you’re going to meet that other agent somewhere you might send a follow-up text message hey I’ll meet you at such-and-such address at this time or maybe you’ve arrived somewhere where you’re meeting someone and you arrive before that other person so you might text them I’m here for your running late and you want to let the person that it’s already where you’re meeting know that you’re running late so you might send a message saying hey I’m running 10 minutes behind these are normal tax in a real estate setting your informing someone you’re not expecting right back a book to you in response it’s just letting them know where you’re at if you’ve gotten their what time it’s confirming something you may have talked about on the phone in a way it’s effectively sending an email but to a more accessible device which is the phone so it’s going to be red sooner and it to be much shorter than a normal email mean a text message is essentially a cell phone telegram what I’m seeing more of that I find irritating is agents that are negotiating home sales were talking about the sale of an asset worth hundreds of thousands if not millions of dollars being negotiated through text which I don’t think is an appropriate forum for such an important negotiation and if you look at it from the perspective of what’s your listing agent if you couldn’t offer and the offers filled out poorly and it’s missing the accompanying documents such as proof of funds or pre-qualification letter how serious do you take that offer and if you entertain offers from buyers that can’t meet those simple professional guidelines like having a complete offer well the quality of buyer that you’re going to work with diminishes so you see the same thing with text message negotiations can you really negotiate well when you’re limited to so few words through a text mean how insincere is that and also think of the person that would try to respond and name all the factors involved in such a Monumental decision and how limited are in their response I mean certainly email is much better because you can ride out hair wraps and paragraphs and paragraphs of factors to consider it’s it’s documented properly but moreover real estate is about a more personalized experience and in negotiation face-to-face is always the best because it’s more serious people have their they have to be more sincere they can’t just hide behind text they have to look the other person in the eye and negotiate and a good negotiator knows how to deliver messages with sincerity so that they can make a case and soften what would be otherwise aggressive terms soften the blow so that their client is better represented so this goes with sending an offer hey if you’re an agent and you’re sending an offer and that offer has terms that are very favorable to your buyer then are you going to send an ice-cold offer with kind of shocking terms to the seller and listing agent without a phone call because I think that a phone call should accompany any offer so that you can personalize the offer and say hey look this is how we came to our offer amount this is what we like to do we really care we really respect the seller and then you have this conversation that softens the the shock that comes with looking at a purchase price that may not be as idealistic for the seller is the seller had hoped that goes with negotiating repairs request for repairs form or asking for a seller credit or any sort of negotiations involved if you send just the document through email and say hey here’s our request for repairs let us know and it has a huge laundry list of repairs to the seller to do or some large number of a seller credit the buyer wants well it’s going to be a splash of ice cold water in the face that cellar but if that document is is accompanied with a phone call by the agent sing it look we put a lot of thought into this and we talked to some professionals and this is how we came to our conclusion then the other agents can understand that look this isn’t just someone trying to lowball being sincere this is someone that that cares it’s a considerate person and they have some justification in terms of where they’re coming from and it allows Minds to meet better in a negotiation and certainly face-to-face is best phone conversation after that email below that and text message has to be the worst because if you’re asking for some sort of serious decision or you’re proposing something large like a purchase price or something that translates to a lot of money or a lot of work how can you really expect the bat the best response from the recipient of that text message just like you or the person riding a text may have a lot of factors involved how they arrived at a certain number or whatever they’re trying to negotiate will the person on the other end they put a lot of consideration into their position so how can that be properly conveyed through text message again these are telegrams through a cell phone how can you really talk about all the terms involved and educate the other party as to all the factors being used to make that decision because it’s educating the other party as to what your motivation is and how you came to your your conclusion on a matter that’s how parties will meet and make a deal so text message just takes all of that away in my opinion it to way for agents to hide because they it’s easier as we know for people to make snarky comments or act very bold and writing or online or somewhere where they don’t have to actually show up as a human and talk to someone look them in the eye and have that Human Experience and really be considerate and type something but hard to look someone in the eye in person and an act so so bold or one-sided so again as an agent I would say if another agent approached you with a text message I would not engage them just like if you get an offer that’s incomplete I would say look this is what we require for an offer you have professional boundaries that you must set you have a certain sort of perimeter that you must set in order to act on a professional basis so if I get an offer that is incomplete I might tell the buyer’s agent look your offers missing a pre-qual letter or it’s missing a proof of funds or the proof of funds as it does not match the buyer on the offer please resubmit so that I can present your offer to my seller cuz if you just take some sloppy offer hurt your seller there than you’re now the slob know being a slob is contagious and if you allow it if you adopt the bad etiquette of another agent well now you’re representing that to your client and because you haven’t said a professional boundary and same goes with a counter offer often you know a professional agent will typically say if if when negotiating terms verbally so let’s give me a quick example there’s a counter offer that’s been made and from what to the seller counters the buyer okay well agents might talk back and forth and and when the buyer’s agent says would yourself would the seller be open to this would you guys be open to whatever the term might be the proper response from the listing agent or from the other agent should be the seller will happily consider it just put it in writing put on a counter and I’ll be happy to present it because talk is cheap as the old saying goes put it on a document let’s do this professionally let’s do this the right way for the benefit of our parties and everyone involved and that goes for text messages same idea put it in writing let’s let’s look call me if someone texts text me with something that I just simply don’t think it’s appropriate for text message I just call them because take me to understand that then answer that I need to give this complex and multifaceted it’s a disservice to that person cuz I can’t give them a proper response to text and add to disservice to me because they’re trying to downplay the importance of an otherwise complex question should be address of your phone call so don’t get caught up in this hole text trend of trying to take everything every form of communication and and reduce it down to a short text message text has a time and a place that’s not in negotiating real estate so I would think of in your words a way to set a professional boundary when it comes to text messages and I would enforce that when agents text you in agents will understand too that you as the agent that setting that boundary that it’s inappropriate text certain things and that it needs to be moved to a phone conversation or an email or however you want to do it they’ll understand that you you can be pushed around that you are a professional and you have perimeters and place to conduct your business and you don’t compromise and it sets the bar higher. There you go on the text messages moving over to the other topic so often there are problems that arise when a listing agent changes the commission offered to the buyer’s agent and so everyone’s going off what’s listed in the MLS and then will I still see theirs are cooperating broker compensation amount 3% or two and a half percent and that can be changed just as easy as anyone can log in and edit the MLS now sometimes I get a phone call that the agent that wrote the offer remembers the listing show 3% a month ago but now it shows 2% right when the offer got submitted and that it was changed so there’s a simple way to avoid confusion when it comes to the buyer’s agent commission because it’s happened this happens all the time sometimes agents listing agents don’t even mean to change the commission sometimes they do sometimes they’re being nefarious but none of that matters if the buyer’s agent does the proper steps to when they write an offer to ensure that they’re getting the commission that was offered so my suggestion is every offer should include a cooperating broker compensation Form that’s a car for CBC it’s a simple one-page document that basically certifies in writing what’s being offered to the buyer’s agent there’s even a box you can check confirming what was publicized on the MLS if there is a bonus in addition to the cooperating broker percentage you can add that on there as well but this address is the compensation in the beginning when the offer submitted because otherwise if the CBC form isn’t included with the offer then the buyer’s agent is relying on the seller’s agent to inform an escrow what that amount is and then escrow will drop instructions to pay the the cooperating broker that amount and that’s often when there’s a problem that’s when it gets flagged usually the buyer’s agent sees in the middle of escrow that the wrong amount is on there and then they checked the MLS in the MLS doesn’t show the number that the buyer’s agent saw before and if they don’t have proof then it’s pretty tough so the best thing to do is always have an MLS print out of any property that you make an offer on because that’s going to serve as evidence that’s essentially a time-stamped sheet of evidence showing that the listing agent offer a certain amount as compensation but if you include that CBC form of your offer then the listing agents going to be signing off and there’s really no disputing with a cooperating broker compensation is that point because it’s in writing it agreed to by the parties so just remember in conclusion to include a CBC form cooperating broker compensation Form with your offers to one page for music included when you send over to the listing agent so that it shows in writing that there’s no understanding what’s being paid to the buyer’s broker and will end their thanks for listening and I hope you found this podcast informative.
Transcript from Podcast.
Today we are going to talk about what to do when your listing just won’t sell this is a fairly common question I get asked usually after an agent has spent months trying to sell a property for not having luck and the seller is getting frustrated and the sellers putting pressure on the listing agent to make it happen find a buyer for the listing agent might feel like that exhausted all of their options and they’re trying to figure out what they can do so they reach out to me for some ideas so the first thing I usually do is ask the agent a couple questions to analyze the situation and figure out where we’re at the first question I ask is if the agents getting a traffic so in the beginning of a listing usually there’s always traffic everyone’s curious there’s a new property on the market in the area it has very few days in the market everyone’s going to take a look or most people are going to take a look well traffic naturally kind of Fizzles after a while for the question is if you’re a month or two months into having your property listed and you haven’t received an offer yet has traffic died completely is it crickets or is there a little bit of traffic that said only trickles through this is an important question so if the answer is yes that there is traffic let’s say we’re 60 days plus into this listing and there are still agents coming through and showing your listing to Byers then I would say what are these agents in because no agent should go through your listing without you as the listing agent calling that buyer’s agent and asking for feedback and asking for candid feedback because a lot of buyers agents if they get a call from a listing agent they’ll say something like oh my buyer liked it but they’re considering a few different options will get back to you or will let you know if that we’re going to ride well that’s not very helpful to a listing agent it’s just kind of a pleasant courtesy and not true critical feedback like quite frankly your listing is dated and looks not in a very presentable condition relative to other listings in the area your listing doesn’t have blank when all the other homes in the neighborhood do my buyers money goes further with other homes could buy I mean that’s a sort of critical feedback That’s essential and one of the main reasons why critical feedback is essential is if you was a listing agent start telling a frustrated seller that all these opinions and reasons that you have while their property isn’t going to sell it less effective then if you get that feedback from buyer’s agent should have come through because if you can tell the seller that out of however many buyers agents came through they’re all saying the same thing that all the same critical feedback they’re all telling you or there’s a pattern that they’re telling you that the property is overpriced and there’s some issue with it they don’t like they don’t like that it might backup onto another sort of property or something loud like a freeway or whatever the characteristic might be that makes the listing less attractive if you take that information to the seller then it doesn’t put you in the position where the seller looks at you like you’re the problem you’re the negative person because let’s face it listing agents have to be Optimist listing agents get listings by telling a seller that they’re going to give to get that seller the top of the market price the highest value excetera they go through the house and they compliment the seller on him how nice the upgrades and the work that the sellers put into it is and I see a lot of agents are consistently busy by just overpricing properties and that’s part of the whole optimism that listing agents have for better for worse that’s just a characteristic that successful listing agents have their very optimistic with their sellers about price about condition and then when reality sets in they and they may not get that very high top of the market value then they’re also good at talking with their clients their sellers about when to do a price adjustment without causing me sort of awkward tension between the listing agent and the cellar because the listing agent just says you know what seller I think that you’re asking too much we need to reduce and there’s no sort of evidence backing up that listing agent suggestion the seller is going to look at the listing agent like okay you were up what’s going on that same spark that same attitude that you had its kind of diminishing why is it just not easy for you so instead you’re going to just have me lower the price and receive less money to make your job easier or you going to really Market my property so if you if you have feedback from all these buyers agent to come through these aren’t your words of negativity you’re just passing the message so you can say something like look I’ve talked to ex number of buyers agents have come through and these five of them said all had an issue with the price and I took that feedback and I did some market research and I see that if if you’re a buyer that has x amount of dollars to spend in this neighborhood well that house down the street just went pending is bigger for the same price that you’re asking and the other house down the street is bigger and has a pool and yours doesn’t but you’re asking more than that house and then your reframing the sellers thinking so the seller understands that from a buyer’s position if they go into a neighborhood and they have a certain budget how far will their money go because every cell even agents that are experienced to sell their own homes have this problem it’s the seller delusion where you know as a seller firsthand all the work that went into a property you know. When you get a choice to use a better product or a more expensive product when you were doing renovations you chose a more expensive one there for your your property has more value well somehow or another through thinking like that the seller just sees of course the top of the market value for their property right and actually if you own an asset you want to get the most you can when you sell it it just common sense so is this as the listing agent you also need to break through that seller delusion of getting the absolute most money you can for your property and bring that seller back down to Reality by using empirical data and Imperial data is the buyer agent feedback that I’m talking about so you can follow up with these agents and take notes the more diligent you are the better case is going to be because you can come in as this optimistic listing agent and say look we’re testing the market we have buyers coming through here’s their feedback and it’s going to be critical and it’s going to be negative and you have to tell them haters going to be negative you can just tell the seller and let the seller decide the less of your negative opinion that you that you input into the conversation the better really you’re just trying to convey a message that there’s a pattern so the seller can come to their own conclusion because if you start telling the seller I’ve concluded your overpriced and you need to reduce then the seller will look at you like you’re the problem and you’re not because let’s take a step back and look at listing and selling a property and you’re you’re the reason why you’re not the problem at this point in listing real estate as an agent we’re in the internet age everyone’s looking online everyone buyers are looking on their own through consumer sites like zillow.com and realtor.com and you name it there dozens and agents are looking on the MLS and a molasses indicating that data to all these consumers sites so so homes are bought and sold through the internet they’re discovered on the internet through Discover online and then an agent facilitates the sale that’s the reality of it there are rare cases where someone drives by and sees a sign and there are cases where someone wanders into an open house but those are anomalies those are not the standard standard is at when someone wants to buy a home they have the laptop and they’re sitting on the couch in the evening and they’re looking on all those consumers sites and their finding properties and are emailing to the agent and the agent is probably emailing listings to the buyer or is create an automated search in the MLS so that the buyers aware of any any listing it comes available I mean I’m shocked at somebody’s buyers how diligent they are because I knew listen to become available and in almost real-time from the from the moment that a listing agent upload the listing to the MLS it’s been syndicated to a site like realtor.com and then the were the buyer is going to get an update on their on their phone or whatever app they use that they’re doing their search with and so I’ll tell the agent hey it’s just 2 hours ago can I see it in the agents thinking oh my gosh shut it mean it’s impossible to compete with buyers that have access that same data so so getting back to the point here homes are sold through exposure online that’s how people are looking now being a listing agents competitive when you’re doing the listing presentation you’re promising all these different marketing efforts to the seller you’re telling the seller going to do open houses you going to do a mailing campaign you’re going to post on social media the reality is those for the most part have a negligible effect in fact mailing a new listing flyer to the whole area is more beneficial as a marketing material for the listing agent then it is to exposure to the home in the old days that worked in the pre-internet days with the days of door knocking and the days of the MLS being on an old computer that buyers and have access to before data was in the kid sure you wanted as much exposure as possible so naturally to send Flyers out was one more way to tell everyone locally that hey this is for sale if you or someone you know is interested let me know but no one’s looking just at Flyers right people are looking online that’s where everyone’s looking and buyers are funding their own listings for a while buyers would come into our office and walked by my office and if I bumped into buyers that might have been in the office for whatever reason I would ask them hey just curious did you find your listing or did your agent send it over to you every single one told me they found their listing and notified their agent about it and this is over a two-and-a-half-year. With dozens of buyers obviously that’s not the best Market sample but just saying that a lot of buyers and I believe the large majority of buyers are fighting their own listings so my point all this is not most of the other stuff that you do as a listing agent is kind of a dog and pony show to show the seller that you’re breaking a sweat and you’re earning your commission so when listing agents are having trouble selling their property they start thinking they need to do more of the dog and pony show to somehow bring a buyer out of the woodwork and I would say don’t confuse that sort of minutiae of these book. The book emails to other agents with a listing hey here’s my new listing come bring your buyer to me is just such a waste of money and time really what it comes down to is are you getting proper exposure on your listing if your listing is on the MLS and it’s being syndicated to all these consumers sites and you have a real estate sign in front of your listing or in the window of your condo listing or somewhere so that people can identify where it is the property is getting plenty of exposure if your MLS indicates always consumer sites and you’re on the local unless you’re getting overwhelming exposure the problem and this is ultimately where I think all roads lead to when a listing isn’t selling is price and people will give me reasons like well this property is in really bad condition it was Trashed by the former owner and insides is disgusting or has this problem with that problem okay that’s a reason but it’s the price right because someone will pay some price for that property maybe not the price that you’ve had it listed at for 2 months but they’ll pay someone out there will pay something and that goes for properties that might back up onto a freeway or have giant power lines behind them or if all the little characteristics that make properties less attractive it all comes down to price again those characteristics that make properties less desirable they affect price but price is the reason if you drive along the freeway and you’re looking at these homes that are facing some huge freeway with seven Lanes on each side someone is paying for those properties of people are living in them and it may not be as much as the street that’s a half a mile into the neighborhood half a mile away from the freeway right there’s a price adjustment for these homes have backup onto a noisy stinky freeway but someone is paying for it so all roads lead back to price and price is that sensitive such a listing agent to The Optimist that is guiding the sellers of the process it’s a very touchy subject because again if you just say hey seller your property is not selling let’s reduce the seller feels like they’re having a subsidized your inability to bring a buyer to their listing which is not the case right when needs to happen is you as an listing agent you need to gather that data from all of these buyers agents that have toured and you need to tell the seller look here’s the common feedback that we’re getting from these buyers agents and again this is why it’s so important to talk to his agents and when they give you that that nice courteous and answer about why their buyers are interested or they may come back you need to puncture through that veil of politeness and ask them for critical feedback say okay if there’s one what’s what’s the most unattractive characteristic or feature of my listing minis are questions that you need to ask to probe the buyer’s agent to give you critical feedback and then you need to take notes and used to deliver these reports to seller understand this isn’t just you quote unquote giving up your not really giving up the seller just looks at that way when things get tough and you don’t bring a a buyer no buyers are showing up so the bottom line is all roads lead back to price and that’s a conversation that you have to have with the seller and that conversation should be predicated on empirical data which is feedback from people that have come through and I would add on in addition to offering that critical feedback from buyers about why the properties and selling do market research look at the MLS on a consistent basis and put yourself in the shoes of a buyer and look at your listing whatever your listing prices and do a search do a search a half-mile out or even a full mile out of active listings that are that where the max price is your listing price and then see what how far your money will go so if your listing is 900000 put 100,000 in into the area half mile outer where we need to go in the area and see see what how far your money will get you how much house 900,000 will buy because that’s what fires are doing right they want the most for their money and if you look and you see that your properties and selling and other properties have gone pending offer more for the money and that’s that’s very common sense as to why your listing isn’t selling again it’s really about building a case of explain to your seller to be realistic because if you’re getting this out of the exposure holding holding 30 open houses versus 15 is not going to find you a buyer or doing some sort of other marketing campaign or posting on Facebook or doing these desperate tactics like sending a postcard campaign to 500 of the closest neighbors or sending a book email blast to other agents again total waste of time just so absurd agents have buyers are looking online Loki on the MLS everyone’s looking online that’s how properties are sold nowadays so in conclusion remember that all roads lead back to price someone’s willing to pay a price for the home it doesn’t matter how bad the condition doesn’t matter if some hideous crime happened in the home doesn’t matter what the situation is similar to pay the price and if you’re getting that property. Bossier having it online on the MLS syndicated to all the consumer sites then you are you’re putting it in an open-market setting where a pool of buyers the market can determine what they’re willing to pay in conclusion ask yourself as a listing agent are you getting showing still are you getting any traffic even if it’s slow or you getting just crickets if you’re if you’re not getting any showings it’s likely that you’re very overpriced very overpriced remember because even the conditions terrible even if your MLS pictures are just show all sorts of problems in damage though there are properties there that are in terrible condition and they’re getting traffic because they’re priced accordingly so if you’re getting no traffic at all you are very overpriced now if you’re getting slow traffic then make sure we’re getting feedback from the agents lots of empirical data to make the case to the seller that there’s a pattern as to why buyers are not making an offer there’s a common factor in a critical feedback so that you are simply delivering what the market is saying the market has spoken you’re delivering the message rather than appearing like you’re giving up and asking the seller to take a financial hit and reduce cuz that’s what happened it’s unfair to the listing agent but it’s just the reality of it when you get that empirical data bring that back to the seller put yourself in the buyers shoes make a case against deliver more data more evidence to the seller as to how much how much home the list price will get a buyer because the sellers home is competing with other listings so knowing that your listing is in competition with whatever else is available in the neighborhood it’s crucial that you always check in and see how much home a budget equal to the listing price will get a buyer because buyers naturally are going to get as much home as they can for their money and that’s what your listing is competing with it’s really a matter of informing the seller so they can arrive at their own conclusion in terms of getting realistic about what the value of their property is I know that having a sort of conversation about price and having to do an adjustment is not the answer that most agents want to hear usually they’re hoping that there’s a Magic Bullet or there’s some sort of strategy that they haven’t thought of that perhaps myself another agent knows of the they can tell the listing agent to magically get a property sold but at its core selling real estate is actually not that complicated like any asset or good the seller needs to get as much exposure to the largest pool of buyers possible and those buyers are going to deliver a fair market value offer based on how valuable that asset is I hope you found this episode informative and I appreciate you for taking the time to listen thank you
Transcript from podcast:
Contingencies episode #3
In this episode we are going to talk about real estate contingencies I get a lot of recurring questions about contingency periods, what happens when they expire, and how that affects the deposit, so I figured it would be good to do a primer that covers important factors to consider when it comes to real estate contingencies. So among the many contingencies in a real estate transaction there are three big ones that everyone’s paying attention to and the first is the buyer inspection contingency which lasts 17 days from acceptance, the next is the buyer appraisal contingency which also last 17 days from acceptance, and then the third is the buyer loan contingency which lasts 21 days from acceptance.
Before I go further I should actually talk about what constitutes acceptance because this actually gets confused fairly commonly, what happens is on a purchase contract if you look at the very top there’s a little space for the day prepared and that’s the date that the agent write up the contract I’ll see a mistake where someone will just jump back into a transaction to the paperwork two or three weeks in and they’ll look at that date because it’s just right there on page one and they’’ll count the contingency period from that date which is incorrect. Then of course the buyer signs that at the end of the purchase contract and the date the buyer signs may or may not be the same date on the top that they prepared when the offer was filled out by the agent and neither of those dates matter quite frankly all that matters is when the seller signed that contract which likely will be a completely different date because the agents going to write the offer they’re going to give it to the buyer to sign the buyers going to send to the seller and the seller may sit on it for a day or two or whatever then the seller is going to sign and at that point the offer becomes accepted it’s ratified as the other the other signature on it that’s needed in order to be fully executed so the date that the seller signs that contract that’s when your account from now the same idea applies to counters so let’s say the cat the seller gets the offer from the buyer decides they want to do a counter the seller writes up a counter offer in sent it to the buyer another buyer might sit on it for a couple days well if the buyer decides after a couple days of thinking that they like that counter and they sign it and then they date it well that’s the date that this whole contract you can fully executed that’s the date of acceptance and that last signature needed in order to fully execute. Counter offer the date by that signature by the other party that’s the day that you count from so it’s really whenever the last party needed in order to execute the document signs whatever date that that party signs that’s the date in which will count from to determine the number of days in that continue CPR the starting date all right so just important to when counting when when coming back into a transaction a couple weeks in because you want to remove contingencies it’s important to look at the start date and end Trace that trail of counter-offers and figure out when the last signature was done because often I see mistakes made where people just look at it the purchase contract in forget that account or with sign my book party both parties 2 or 3 days later you know one chip also is got in house when we do the in-house transaction coordinator we have an Excel spreadsheet and the second that we start a new transaction we find that date and we put it in one of the first columns on that spreadsheet that way as we go through the transaction and hit all the milestones we can always refer back to that date and where the earlier columns on a spreadsheet so we always know how many days into a transaction we are so it’s very helpful in my opinion to write down that that magical starting date somewhere that you can quickly refer to back to it so that you’ll always know how many days into a transaction you are all right so what happens when a contingency is not removed well the simple answer, the quick answer is nothing happens because contingencies don’t expire naturally on their own they stay in place until they’re removed by the buyer in so let’s say 17 days arrives your 17 days into a transaction that marks the end of the inspection and Appraisal contingency. Well it’s incumbent upon the seller to enforce was periods because again those contingencies will stay in place until the buyer removes them and often buyers are in a huge hurry to remove them because hey they want all the time they can get to do their inspection and get their loan also the buyer’s deposit is refundable 100% refundable as long as there’s a contingency in place so another reason why it’s incumbent upon the seller is that they don’t have the the full commitment from the buyer until the buyer has skin in the game and the buyers have skin in the game until they removed all their contingencies and they know that their deposit is in a non-refundable position so the buyer knows that they need to be proactive about going to transaction closed because if not they’ll lose their deposit now the buyer’s deposit could be jeopardized if they wait so long that the close of escrow date comes and goes and they don’t actually close escrow and fulfill their purchase then they risk it being in default and that’s another situation but the buyers defaulting on the purchase they made a commitment to we’re talking about is merely just the contingencies which basically is an escape clause for the buyer until they’re removed so what can a seller do to enforce contingency periods well the seller for the most part stuck on a real estate transaction the buyer can back out they have these contingencies in place the seller doesn’t the seller can’t really right to the buyer 2 weeks until the transaction say you know what thought about it don’t want to move after all let’s cancel the sellers stuck the buyer on the other hand they of course come back out to the contingencies are removed so what the seller needs to do is send a notice to perform to the buyer requesting that the buyer remove contingencies the newest perform document has a two-day window that it gives the buyer to perform the specified action or the seller can cancel so here’s an interesting thing that I’ve seen some agents do what’s a good is 17 day contingency. Now let’s say the seller’s very eager to have the buyer remove contingencies what’s a the sellers just very anxious or the buyer possibly backing out well the seller can wait 17 days and see what happens and at the end of the seventeenth day if they don’t get a contingency removal the seller can then send a notice to perform but then the seller has to wait two more days for the buyer to make good on that nose for form document because if the seller sends it then the buyer has two days to deliver the contingency removal and the buyer effectively bought themselves two more days and 19 day contingency. Or the seller can send that notice to perform to the buyer on day 15 and in anticipation that on day 17 all the continue the specified contingency must be removed the benefit of that is that if the buyer doesn’t deliver the contingency removal then the seller can immediately cancel the sellers two day waiting. Where the seller waits for the buyer to make good on removing contingencies takes place during the last two days of the contingency. So that way if the last day of the contingency. The buyer doesn’t deliver the contingency removal the seller does not have to wait they’ve already done their two days and they can immediately cancel if they want unfortunately would typically happen to the sellers are lenient they don’t listen to notes perform didn’t want to be perceived as too aggressive and they go day after day after day after the contingency. They might get a verbal promise from the buyer or one way or another they are encouraged to offer more time to the buyer and it’s usually that were very close Phone call and it’s usually that were very close to closing escrow or the close of escrow date is scheduled to close of escrow date and the buyer still hasn’t remove contingencies and the lender the buyer’s lender usually is hard to reach or asking for more time or has done something that’s freaking people out so my first advice on this is get the notice for To the buyer soon as you can it has nothing to do with being aggressive it’s just a natural course of action even if the seller doesn’t want to cancel it’s good that the seller at least has that Leverage because it sends a message to the buyer that the seller is serious and wants to hear to the timelines prescribed in the contract but also what the seller needs to get out with the seller doesn’t want to be trapped what if they want to market for a backup offer or or move on with another offer entirely it’s just wise to have that no spur form sent out and demands made to the buyer to deliver a contingency removal so the buyers committed because if you’re after 3 weeks into a transaction after acceptance there’s no reason why the buyer shouldn’t have their deposit non-refundable on the line to show a commitment that they’ve spent all this seller’s time with taking the home off the market to other buyers to go down the whole process of a transaction only to back out in the end so the short answer is synonyms for form and make sure that the buyers committed with a non-refundable deposit because until that continues to use removed the fire come back out even the last minute even if it’s the day before the close of escrow the buyer can send a cancellation over and say you know what sorry to waste the last 29 days of your time but not going to work out when you can get me the loan that I wanted whatever their reason whatever the reason they can back out and they can ask for a deposit to be returned and almost certainly that deposit will be returned at entirety and if it’s not if the seller wants to be vindictive and try to hold on to the deposit there’s a California civil code section 1:05 7.3 that says that the seller can be fined for withholding that that deposit because for deposit to be returned does the buyer will typically send a cancellation form and I’ll ask for a refund of the deposit in the seller has to sign off a green to it and escrow needs mutually a mutually signed instructions for both parties that states specifically instruct escrow specifically how to release that deposit and ask her to have a deposit just sits in the escrow account so the seller can be difficult if they want and say I’ll get around a signing that that release of deposit later or they’ll refuse to maybe if that happens the seller can be subject to a penalty of fine if they do if the seller refuses to sign off on instructions for 30 days to release the buyer’s deposit inactive bad faith essentially because they’re angry and frustrated that the buyer wasted their time they can be penalized so again these sorts of boundaries when it comes to enforcing the contingency. Need to be addressed punctually in the middle of the transaction it shouldn’t be just a matter of leniency we’re at the very end everyone’s better because the buyer took advantage of the fact that the contingency doesn’t expire naturally didn’t send a contingency removal form and Drug transaction out too long so that’s why it’s it’s it’s professional courtesy that people stay on on timelines when it comes to removing contingencies all right so you’re something else to consider two sometimes you have offers from investors or a cash buyer that says they want to wave continuous he’s okay so if it’s a cash purchase the loan contingencies going to be waived right cuz you’re not getting a loan so that makes sense the appraisal contingency will very likely be waived it may not maybe that fire investor wants to have an independent third-party come out to an appraisal to make sure they’re not overpaying but Austin cash offers don’t have an appraisal contingency so what’s your big can can you see that I had brought up the inspection which is very important because most cash buyers or usually looking to do an inspection figure out what their cost to fix up a property or what they’re getting into is going to be so awesomeness still have very short inspection contingency periods send them to see him as short as three days some ice some I even see waves so some investors some offers I see investors put that they’re waiving inspection. Okay or Converse that I should add that some sellers that may have a lot of offers or have been Jaded by investors coming through and an example of this as we’ve had clients that are selling a fixer-upper and I’ll get multiple offers and investors will come in make a cash offer tie up the property and escrow and then after a few days decided they don’t want it or they’ll try to renegotiate a lower price and the property will fall out of escrow well if that happened once twice three times the seller gets really burnt out on the process we’ve had sellers have called their office and they and they tell us look we have a lot of cash offers can we counter no inspection contingency well here’s something to consider regardless of which party is interested in doing a no inspection contingency contract by law by California law once the transfer disclosure statement is delivered to the buyer the buyer has 3 days to back out this is another California code section 1102.3 yes I wrote this down at and memorize it but it’s on the last page of the transfer disclosure statement and this pertains to transactions in which disclosures are delivered to the buyer after acceptance of the offer so in Northern California for example off and disclosures will be delivered in advance well in Southern California this the overwhelming standard is that once there’s an accepted contract the seller will deliver all disclosures within the 7 Days prescribed on a purchase contract cuz he’ll see the seller has 7 days to deliver everything to the buyer 7 days from acceptance well in that case whenever that transfer schools your statement which is one of those documents is delivered to the buyer the buyer has 3 days to back out based on what they’ve seen so effectively creates a three-day inspection contingency. Beginning from when that transfers goes your statement was received from the seller so that’s just another side stripe when I wanted to bring up in regards to inspection contingency is because you see all sorts of contingencies waved and change to make offers appear more attractive there’s kind of a small Trend that right now going on where fires that are obtaining financing from A lender are waiving the appraisal contingency and the thinking behind that because it’s it’s it’s it’s silly obviously because the lender is going to require an appraisal the transaction is subject to the appraisal the lender will not furnished out loan without that appraisal coming in at the appropriate expected value so what the buyers doing is they’re trying to make their offer look more attractive by saying hey we don’t need an appraisal contingency you don’t to worry about that but there really is one because the appraisal contingency expires after 17 days from September the loan is 21 days even longer if the appraisal comes back and there’s a problem with it then that means there’s a problem with the loan so the buyer just cancels under the premise there’s an issue with obtaining a loan and they have the loan contingency in place for 21 days there for the buyer can cancel so it’s kind of a sneaky tactic in my opinion because really it’s an appraisal issue and and they’re just they’re just waving at appraisal contingency so the seller thinks it’s an issue like they’re taking some sort of worried off the sellers chest but really the buyer will just just assumed cancel Under the Sea under the guise of the loan contingency rather than appraisal so I hope that Trend doesn’t stick around because I don’t think it does anyone any good it’s somewhat deceiving it’s oh there it is in a nutshell contingencies they stay in place the buyer gets their deposit back until they’re moved by the buyer in writing it take away is that sellers Force those contingency periods the seller should send a notice to perform the seller should be on top of the transaction and forcing timelines and making sure the buyer is removing contingencies as each of those contingency periods expire and that will insure a a much smoother transaction and at the transactions going to fall apart so be it but it’s better that it falls apart earlier than later because if it’s inevitable that the transaction was going to fail would it be better for it to happen at day 21 rather than day 28 or 35 or day 41 because I’ve seen it happen I mean these will go on for weeks I’m some months after the end of the contingency. Because the sellers just let the buyer get away with it for so long and the buyers defense it’s almost like a survival Instinct for them they’re just they want the house they’re waiting on a lender sometimes lenders get flaky at the end of it because the lender will say Alex in underwriting and everyone is waiting everyone’s holding their breath the buyers one there by the specially the buyers terrified of losing their deposit because it’s a lot of money and the same time depending on the lender to get their act together to deliver so the buyers is doing everything they can to buy themselves more time because they’re afraid of losing a deposit so it’s a fine balance Define balance where at a certain point the buyer has to have a reputable lender that’s going to make sure that they know by day 21 they’re confident that they can get a loan and if not then there needs to be a serious conversation with the listing agent about extending contingency. Extending close of escrow or what the problem is exactly I hope you found this episode on contingency periods to be informative and I appreciate you for listening thank you
Transcript from the podcast episode:
Greetings agents. I’m using a different microphone this time to eliminate that creepy background noise that was in the first recording, so hopefully the audio quality is better. We’re still testing things out. All right, so the topic of this podcast is how to get paid directly from escrow and what we’ll do is look at a typical scenario, the traditional scenario and then the difference of being paid directly from escrow. So in a standard scenario, the escrow is going to send the check to the real estate office and escrow companies typically overnight it, but I’m seeing more and more of snail mail and letters with commission checks in it. I don’t know why. Probably asked for companies are trying to cut costs either way, the check arrives here at the real estate office. Now when the check comes in the same day, we scan that check and we send a copy to the real estate agent so they have a record of it and provided the paperwork is done.
We immediately cut a check to the agent and what I do almost daily is drive these these letters down to the post office. The reason is that there’s a noon pickup at the post office, there’s a 5:00 PM pick up at the post office. I just think things get processed faster down there and it kind of expedites the whole, the whole process. I know that dealing with correspondence all the time with different real estate companies and then mailing us checks, sometimes someone will say, oh, we mailed it such and such day and then it takes several days to arrive and I’m just imagining someone taking a a letter and putting it up, you know, at the front desk and then that person might take it down maybe that day or maybe the next day and maybe they take it down, mail it at 2:00 PM but the mail carrier comes through at 10:00 AM and so now it sits in the office park mailbox for a day or God forbid this happens on a Friday or sits there a whole weekend.
I just don’t like those delays and that’s why I personally take our mail down to the post office to make sure that it goes out. When it does, it arrives very quickly at the agent. So that’s what we do in a traditional scenario. And already there we are much faster than other brokerages, but there’s a faster way. And I know that agents want to be paid as fast as possible. It’s common sense, right? And agent’s worked for weeks, probably months with or with their client. They’ve done all this work, they haven’t been paid yet. Now the property is closed, the transaction’s closed. Why would they want to wait any longer if they don’t have to? So there is a faster way and the faster way is being paid directly from escrow. Now here’s how it’s different. So the broker signs a commission instructions in escrow.
And then what we provided that the agent’s paperwork is squared away. We send a CDA commission disbursement, authorization to escrow signed by an officer of the corporation. In this case myself, and this instructs escrow to split the check, due the brokerage. So the brokerage will receive a portion, Balboa real estate. And then of course the agent will receive their portion do. And, and that of course cuts out all the time of escrow, having to send a check to our office and then our office having new cut a check and send it back to you. So I mean it, it’s not a huge amount of time. It cuts a cut out of the process, but a solid couple of days at least I would say. Now here’s something to consider. In order to have a CDA done, a couple of things have to happen. Number one, the file must be complete in advance to recording.
So what an agent should do is go to www.turbotransaction.com, make sure they have their paperwork in there and then before the escrow records, towards the end of the transaction, the at the agent’s going to click a button, the green submit complete file button, and that’s going to send a notification to the office that that the file needs to be reviewed. And then someone at the office will review the file and send an email back to the agent. Now if there are missing items, the email is say, dear agent, your files missing, document x, Y, and Z, please upload and click that green button again to let us know that you’ve been in there and you’ve updated the file or you’re going to get an email. Dear agent, thank you. Your file is complete if you get the complete email, then you have the green light to go over to Balboa team.com/CDA so it’s our company URL forward slash, CDA.
That’s the commission dispersement authorization I was talking about and in there there are fields that you fill out so that we can create a CDA that instructs escrow to to pay you directly. Now there are a couple policies that have changed over time. We used to not have that CDA page on the website, but I added it because I wanted to avoid any sort of misunderstandings in terms of what the gross commission is or how much the agent expects to receive and all of those terms have to be addressed on that page. Second, I’ve actually instructed our office administrator to send out a CDA. Two with the agent as well to have the agent initial the CDA because again, I don’t want there to be any surprises. The process needs to be transparent the whole time. So then we send that off to escrow. Now it’s important to note that the file must be complete in order to get this CDA.
The reason is that the file is incomplete and the commission’s been paid, then it’s very difficult, very difficult to get those outstanding documents. We essentially become like bill collectors here and this is just something that we’ve experienced firsthand through trial and error over the years. I mean, a lot of what works at Balbo works well because we’ve done trial and error and those of you that have known the company for years and years, you’ll, you’ll know that our commission plan has changed over the years. Little things have changed always for the better. And, and that’s based on trial and error. What works and what doesn’t, what causes problems, um, and what, uh, makes things run smoothly. So there you have it. That’s what you need to do. Just make sure your paperwork’s in order. Now there’s another thing to consider that is if you use an inhouse transaction coordinator, you are always entitled to getting a CDA.
Why? Because again, that that compliance factor of paperwork, we know how it’s been addressed with the Trent, with an in house transaction coordinator word we’re taking, we’re assuming all that responsibility of document collection and your outsourcing the paperwork, right? You’re having another trend, you know you’re having a transaction coordinator step into the do all the leg work for you. So the paperwork should be as good as done. And if we’re the company, assuming that responsibility, it’s as good as you’ve submitting a complete file in, in, in our eyes. And so for that reason, you’re entitled to a CDA. So the transaction coordinator is going to offer a CDA to you if, if you want to be paid directly from escrow. So keep in mind that if you use an inhouse transaction coordinator, you also can, can get a CDA, your files as good as complete. All right, I think that will conclude today’s episode. Thank you.
Avoid the top mistake agents make on a referral fee agreement.
It all begins as to how the referral fee agreement is structured. The form stipulates the fee to be paid to the referring broker is based off of the gross commission earned. Now, this verbiage is important and necessary because it protects the referring broker. Imagine if the agent that received the referral had a terrible broker split or some sort of debt that would take a big bite out of the gross commission. Well, the referring broker should be subject to the arbitrary fees incurred by the recipient agent. Therefore, the referral fee should be calculated based off the gross commission. All this works well and fine until an exception comes up. An example would be a problem in the transaction where the recipient agent has to contribute a portion of their commission to save the deal. Another example would be if the referred client turns on the agent and tells them they want a rebate or else they will go to some discount outlet like Redfin. Well, an agent will usually chip in commission if it saves the transaction. Especially, if that agent has invested time working with that client.
Let’s imagine a made up scenario to show how it all goes wrong.
The referral fee agreement stipulates the recipient broker has to pay 25% of the commission to the referring broker.
The recipient agent has a 70/30 commission split with her broker.
The recipient agent has to agree to chip in $3000 to save the deal. So she assumes the 25% referral fee will be based on the $7,000 commission reamining after she credits her client. This is a reasonable mistake. After all, her 30% broker fee will be calculated off the $7,000 not the original $10,000 gross commission. Only at the end does she find out that her broker is obligated to pay $2500 to the referral broker off the top. So, the new gross commission left for her is $4500. Then she has to pay the broker fee of 30% ($1350), which leaves her with $3,150. Naturally this agent will be unhappy because they did the majorty of the work for 31% of the gross commission. To prevent this one of two things should happen:
- The Referral fee agreement should stipulate that any credits or rebates to the buyer must be deducted from the gross commission in which the fee is calculated.
- The referring agent is contacted and made aware of the need to credit commission to the save the deal and then add the verbage from line 1 or recalculates as flat fee amount to be paid as the referral fee.
If you are interested in the 100% commission model and working with a broker that has the foresight to protect you from scenarios like this then please CLICK HERE for more information.
What is hundred percent commission real estate?
(Transcription) This concept was popularized and entered the mainstream over ten years ago and since then it’s evolved and has changed somewhat. Before 100 percent commission was part of the mainstream program that an agent could get a real estate company. The big talk was about splits, so an agent, let’s say a new agen,t would join a company and they would get 50% and then the company would get 50%, so that would be a 50/50 split. As the agent progressed, they might get 60% or 70%. Companies would recruit agents based on an 80/20 split or 90/10 split and then hundred percent commission entered the mainstream and said here’s a flat fee per transaction and you keep the rest of the commission we don’t care how much the Commission is you just pay a low flat fee. There was also another version of that where the flat fee could have been an annual fee so an agent would pay a fee of let’s say three thousand dollars at the beginning of the year and then the agent would keep the Commission that they earn 100% of the Commission they earn on all the transactions they closed that year. Over time I think that this concept has kind of evolved and changed and companies have looked to find ways to increase revenue and still be within that hundred percent commission model. What that term encompasses now are companies that often charge a monthly fee, so there might be a monthly fee in addition to the transaction fee. Often these companies will charge for errors omissions insurance you know so there might be a risk management fee on each transaction or the agent might have to pay quarterly or semi-annually for their insurance, there might be fees for high-risk transactions or a fee for having access to the office or having a key, basically there are other fees. So if you’re looking at a hundred percent commission brokerages, it’s important that you clarify any and all fees that you could infer working at that office. With Balboa Real Estate over the years, we’ve experimented with hundred percent commission programs to find what would be the best, the least expensive to agents so agents can save more of the commission that they make and of course the company can stay profitable, we have done a flat fee per transaction and we’ve done the annual fee where agents pay the annual fee, and and then get a hundred percent of what they earn, and we’ve always paid errors emissions on behalf of the agent. We’ve never had agents have to pay theirs separately. So we we found that in certain situations where the sales price was very high our E&O; bill would go up because it was how the insurance was assessed, based on the revenue commission, revenue of a transaction. We had agents that were closing three, four, five million dollar properties and making these commissions that go along with it that would increase our E&O bill and we were still charging a very low flat fee. Which would essentially make the company take a loss on those transactions so certainly we can’t stay in business taking a loss on those transactions, but we want to be the lowest cost one hundred percent commission company so we camp with a plan that we implemented over a year ago, that’s been working quite well. Our commission plan is a flat fee per transaction that is ten basis points of the sales price. So the easy math on that is if the sales price is seven hundred thousand dollars, then the flat fee per transaction is seven hundred dollars to the brokerage and the agent will keep everything else. If the sales price is eight hundred thousand then the flat fee to the brokerage is eight hundred dollars. Again, the agent keeps everything else, Balbo real estate pays the errors and omissions insurance for the agents. There are no other fees involved, just a simple flat fee per transaction to keep it very easy to understand and low cost as well. then of course if you have a very high sales price it allows the flat fee to the company to go up just enough to cover the E&O insurance on the agents behalf. If you’re interested in our Commission model, what we believe to be the best hundred percent commission model in the industry, please CLICK HERE
Contingenices Don’t Expire Automatically, They Must Be Removed
Contingencies stay in place until they’re removed by the buyer in a contingency removal form. So the three big buyer contingencies are the inspection period, the loan period, and then the appraisal period. Default verbiage in a CAR purchase agreement or an oorp.org purchase agreement has 17 days for the buyers inspection period, 17 days for the appraisal, and 21 days for the loan contingency. Now, sometimes I’ll get a call from a listing agent and they’ll tell me that they’re 25 days into transaction or some number of days that’s far past all the contingency periods and they’ll tell me that the buyer’s not performing or the buyers Lender is having an issue and they’re not returning calls. One of my first questions is did the buyer remove contingencies or did you as the listing agent send a notice to perform when the buyer was late on removing contingencies? Often I hear the answer’s no. For one reason or another parties forget the listing agent forget to ask or they think that once they’ve passed the contingency period that they aut
omatically expire and they come to find out that until a buyer sends that CR form that constitutes your removal form, those contingencies are in place so a buyer could drag out the contingency period for 30 days or 40 days or as long as they want because they last indefinitely. Until the seller sends a notice to perform demanding that the buyer remove their contingencies or the seller can cancel then – and the buyer of course has to respond by either cancelling or submitting their contingency removal – then those contingencies stay in place. So, it’s important to send a notice to perform if the buyers late on their contingency periods or in some transactions that are higher risk for the buyer defaulting or there’s more tension, listing agents will send a notice to perform prior to the contingency expiring because you can, you can actually send a notice to perform two days before the contingency will expire so notice perform will have a two day period let’s say it’s for a loan contingency on day 19 the listing agent can send the buyer’s agent a notice perform to remove that 21 day loan contingency and it’s a way to proactively ask that the contingencies – you’re expecting a contingency to be removed and if on the 21st day the very date of the contingency is supposed to be removed. If it’s not removed by the buyer then the seller through that notice to perform form has the option to then cancel the transaction and that allows the seller to not be stuck at the buyers whim, to not be trapped in that transaction. It allows them (seller) leverage to cancel or tell the buyer that they were going to cancel unless the buyer performs. So remember, contingencies stay in place until the buyer sends a written contingency removal form.
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