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Company Update April 2, 2021

This is the clearest example of a seller’s market I have ever seen.
Inventory is a fraction of what was already “low inventory.” This means low supply.
Low rates mean more affordable mortgages, which increases demand.
Low supply and high demand push the prices up higher.
Since these supply and demand factors are floating around historic levels, we have the perfect mix of ingredients for this seller’s market.
Make sure that your buyers have a way out if they are aggressively reducing or waiving any contingencies.
Make sure that your seller is protected. Namely, if the appraisal comes in low.
One solution is to add verbiage to the effect of “If the appraised value is less than the sales price then the buyer shall pay the difference in cash.” Please note, “cash” does not mean bills in a briefcase. It refers to cash the same way as an all cash purchase.
MLS Fines
I used to be a fan of CRMLS, the nation’s largest by member size. Mainly because they led the campaign of data shares which united small MLS’s so that agents and listings can have a broader reach.  This is how we can now go to one single MLS and see listings in LA, OC, SD, and Riverside. It wasn’t like that in the past.
There is a tradeoff, which is that it effectively gives a single company monopoly power.
I won’t go deep here, but I have two podcast episodes about monopolies and the MLS.
I will link at the bottom.
Specifically, I’m referring to how often agents get unreasonably high fines with no alternative but   a futile appeal process.
Here are some tips to avoid getting penalized:
  • Enter your listing into the MLS the day the RLA is signed.
  • Not ready to go live? Use “Coming Soon’ Status
  • <Private>
  • Change status from active to pending; or pending to closed; the same day of the event.
  • <Private>
  • Only use pictures in which you or the seller own or are licensed. Of course, this includes professional photographers because they are hired to create the images for you.
The tips above will avoid 90%+ of the infractions I keep seeing agents getting.
In an effort to keep these emails in easily digestible sizes I will end here and send another update soon.
If you have a topic you want me to address in the next email please feel welcome to reply.
Thanks for reading.
Podcast links
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Understanding Escrow Fees

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Does the Name of Your 100% Commission Real Estate Brokerage Matter?

Real Estate agents spend a lot of time comparing commission models, office amenities, and company policy when they consider joining a brokerage. Equally important is the name of the brokerage. Consumers have access to nearly all the data, so it is incumbent for agents to prove their value. Agents prove their value by building trust and credibility with their prospects. This brings us back to the company name. If you are a well-established agent, and your name is already very recognizable, then the name of your real estate brokerage takes a backseat your name. However, that is very rare, some tiny percentage of agents, much less than 1%. For the rest of us, the question will come up with clients, “what brokerage are you with?” These prospective clients are sniffing around. They want to know about your support system and if they are reputable.

So, you can choose a reputable name, like Keller Williams and be done with this, right? Yes, but you also are factoring in what the brokerage will charge you when you close a transaction. Let’s say you want to save the most commission for yourself, so you look at 100% commission model brokerages. This is a different segment of the brokerage world. Again, you will have to look at a list of companies, what they offer, and, of course, the name.  So, Balboa Real Estate fits the bill as a 100% commission brokerage, and we don’t charge monthly fees. We are partial to our name because rather than something generic, like “First Home Realty,” or something abstract like, “Cyber Broker.” The name Balboa is a California icon. In each county of California it has different geographic landmarks and meaning, it sounds familiar.

Agents often call our office because they heard we offer a 100% commission program and they like our name. That is the conversation starter. Agents join our company because our reputation gives agents the credibility they need to win over clients. Agents stay at Balboa because we offer great support and take care of them.

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Do Real Estate Agents Need an Office?

The question arises from agents, “do you have an office?” This is an important question because a big difference between many tradiitonal brokerages and 100% commission brokerages is access to an office. In order to answer, it’s only fair that we give some background information. When proespective agents would call or visit the office to inquire about Balboa Real Estate, the answer to the question whether there was an office to use was an unequivocable “yes!”  Agents were mostly concerned if a prospective client wants to meet then where could they host a meeting. For years, our company had professionals offices and a conference room with company signage and nice furnture, basically everything that an agent would need in a professional office. All this was set up for our agent and then….nothing. By nothing I mean agents never used the office. I shoudn’t say never, because once every 3 or 4 months the conference room was used and maybe an agent would use an auxiliary computer to print something on occasion.

We realized that agents meet sellers at their home, the home the agent would list. Agents would meet buyers at the properties they were interetested in viewing. If an agent needed to to talk to a client somewhere other than the propsective listing or purchase properties, they would meet at the most close and convenient coffee shop. I was told there was no reason for an agent and their client to drive several miles out of their way to meet at an arbitrary location.

When agents need to create a listing agreement it is created online, then either sent through Docusign or a PDF is emailed. The client will sign online or print/sign/scan back to the agent. The same process is used for purchases. It seemed that since the paperwork was done online, there was no point in going to an office to print and fill out paperwork. The concept of the office has changed drastically. At this time our office had over 100 agents, did hundreds of transactions a year, yet the office was always quiet with very few visitors.

As most real estate tools are web-based, and agents can easily have a printer and scanner at home to use as needed, there is no reason to go into the office. In fact, a case can be made that it is less time effcient to run to the office for a few tasks, than to do then from your home office. It’s also inconvenient to request your clients to drive over to your office for paperwork or a discussion. Clients are better served at the home they are listing or interested in buying.

There is one last factor to consider, and that is commission. If an agent doesn’t need a brick-and-mortar office to consistenly go to, then they will keep more commission. 100% commission real estate companies that have limited office recources for agents allow agents to keep far more of their commission than tradition companies. If an agent can save thousands of dollars on a transaction at a 100% brokerage, then is it worth it to invest some of this money in home office? We say yes.

If you are interested in finding out what Balboa Real Estate has to offer. please CLICK HERE

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Can Agents be Paid Directly from Escrow?

We are often asked if real estate agents can be paid directly from escrow.

The close of a real estate transaction often marks the culmination of months of work to earn a commission. Naturally, agents want to be paid that commission as fast as possible. Any reputable company has requirements to be met before the agent is paid. Namely, that all required documents are in the file. At Balboa Real Estate, we want agents to be paid as soon as possible. Our corporate office is in San Diego Cuunty, but we have agents all over the state of California.  Therefore, it will save agents a couple days if agents are to be paid directly from escrow. If an agent has a complete file with all required paperwork on or before closing, then we will send dibsursement instructions for escrow to pay the agent their portion of the commission directly.

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How To Keep 100% of Your Real Estate Commission

The phrase “100% Commission Real Estate Brokerage” has been a popular trope for about 10 years. 100% Commission has taken on the meaning of a low-cost brokerage, typically where a licensee pays a small flat fee to the broker and keeps the rest of the commission. There are variations, but this the general idea.

It can be argued, from a purist standpoint, that 100% commission isn’t truly 100% commission because if a licensee has to give even $1 to the brokerage then it’s not a true 100%. While the term may not be a full 100% to the purist, it is very close to 100% and still far better than tradition brokerage splits.

However, there is a caveat to all this. A clever licensee can structure a transaction to where they keep the full 100% commission and not a penny less. I will show you two ways to make the broker fee a pass-through cost to the client so that they pay the broker fee rather than the licensee.

The first is on a listing agreement, when the licensee is a listing agent. Since there are variations of the transaction fee paid to the broker, we will use $500 as an arbitrary number for our example. Paragraph 3 of the listing agreement is where the licensee will put the listing fee percentage that is being charged. After the space for listing percentage there is the word “AND” with another blank space (see image below). In that space the licensee will put the amount of their broker fee. In the case of $500 the licensee can write something like “$500 broker processing fee” or “$500 brokerage administration fee.” This will cover the licensee’s transaction fee and allow the licensee to truly keep 100% commission.

100% commission real estate brokerage

The other way to truly keep 100% of the real estate commission is with the purchase agreement. Paragraph 7  is the allocation of fees. Section D, lines 8 and 9 are generic blank lines where the licensee can check a box for the seller or buyer and then write in a fee. In the case that the licensee is representing a buyer they can write check the buyer box on line 8 and then write $500 “processing” or “administration fee” to Balboa Real Estate.

This will ensure the buyer pays the licensee’s broker fee thereby allowing the broker to keep 100% of the commission.

If you want to learn more about a 100% commission real estate broker that services all of California then please contact us at info@balboateam.com

 

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Does Outbound Calling Work in Real Estate?

Real estate agents often ask, “does outbound calling work,” or, “does cold calling work?” The answer is at the end of this post, but first it’s important you know why. Real estate agency is competitive and has a long ramp-up period. New agents are super motivated and are eager to be proactive in order to drum up business. This means holding open houses for other agents, sending direct mail, and even picking up that ice cold sales phone to dial for dollars.  While outbound calling is  better use of time than additional training for agents, it’s not a good use of time.

Several years ago and before, let’s just say 2007 and earlier, outbound calling was still a fairly effective way of generating business. However, a lot has changed since then. The internet has become a huge factor in consumer thinking. If a consumer is considering a service or even using a particular agent they will go online and do some investigatory tail sniffing to see if they check out as a professional. This has created a major shift in how professionals and consumers meet. We’ve moved from sales-system oriented marketing to relationship-based sales. Social media and internet presence meet consumer research. Connections are made and quality informative content is delivered to consumers which often results in a sale. This is unequivocally a higher quality way for consumers and professionals to choose to work together. Consequently, it makes outbound calling look more desperate and less credible. The relationship model has has been naturally selected over outbound calling as the winning marketing strategy.

It’s not enough to just say that outbound calling is less credible as the reason why it’s not as good. It’s also important to mention that because it is an outdated method facing extinction, the conversion rate is worse now too. This makes it harder for the remaining die-hards still out there in the boiler room trenches. Will these outbound callers drum up any business through cold calls? Some might, but at painfully thin conversion rates which beg a bigger question – is cold calling a reasonable and sustainable longer term business model? The answer is simply NO.

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Is there really such a thing as a 100% commission real estate brokerage?

Is the term 100% commission real estate brokerage accurate or a misnomer for low-cost brokerages? By now 100% commission real estate brokerages have been around long enough to represent a considerable slice of the the real estate brokerage world.  Many real estate agents know that there are brokerages that charge less than the traditional broker-agent split. Some of these 100% commission brokerages charge a flat fee per transaction with a monthly fee or without a monthly fee. Some brokerages charge a flat annual fee and the licensee keeps every penny of the commission they charge. Many charge licensees separately for  errors and omissions insurance. The point is that this isn’t exactly a 100% commission in the literal sense of the word.  If a brokerage charges a flat fee per transaction, even a very small flat fee, then the licensee isn’t getting 100% commission, right?  Maybe they are getting 99%, which still isn’t 100%. Therefore the term 100% commission encompasses a variety realty brokerages with a structure of very low-cost brokerage fees for the real estate licensee.

 

Now, it should be noted, that this is simply an analysis of what 100% commission real estate has grown to mean. The variety of 100% real estate companies are still vastly better that their traditional counterparts. Many traditional companies charge a substantial percentage of a licensee’s commission that is way more than any 100% commissional estate brokerage. As recent as 10 years ago from the date of this post, the industry was still overwhelming using the traditional model in which brokers took 20%-50% of a real estate agent’s commission. This was justified because agents got to use the office, copy machine, fax machine, and all sorts of “brick-and-mortar” tools. Technology has made most of this obsolete. Realty documents are rarely printed, most of the transaction is done online through email, using Docusign or scanned PDFs. In-person meetings are held at the home of the listing appointment or at properties being viewed by the buyer. The days of bringing a buyer back to your office and having them sign a stack of papers so that you can fax an offer to a listing agent are gone. Agents that seek 100% commission real estate companies realize this and typically have no interest in paying the overhead for tools that they simply don’t need.

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What is 100% commission real estate?

100% commision real estate is a name for a low cost real estate brokerage model for agents. Instead of the traditional percentage fee of a real estate agent’s commission paid to the broker, also known as a commission split, a nominal flat fee or annual fee is paid instead.

As an example, an agent earns a $9,000 commission. In a traditional commission split the agent might pay 30%  to the brokerage ($2,700), but in a 100% commission model they would pay a flat fee, such as $600.

To put it a very simple way, a 100% commission real estate brokerage charges agents less of the commission they earn. Agents typically pay a flat fee, sometimes a monthly fee in addition, or sometimes a simple pre-paid annual fee, instead of a broker split.

The 100% commission model has become very popular in the last 10 years, but the concept is actually decades old.

So why has 100% commission real estate become such a mainstream brokerage model?

The answer is technology. Paperwork is done through services like Docusign or, at the very least, scanned and sent through email. In the past, listings weren’t accessible online, whereas now MLS data is accessible from a multitude of websites. Given that all the tools for agents and their clients need are online and can be accessed remotely, there is less of a reason to have an office to go for client meetings. More agents work from home offices and don’t need to contribute a large percentage of commission for office-related overhead that they don’t use.

Find out more about Balboa Real Estate’s 100% Commission Model HERE

 

 

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What To Look For in a 100% Commission Brokerage

For years, many real estate agents have left the traditional office model of paying 20%-50% of their commission to the brokerage. These agent go to brokerages that charge agents a flat fee instead instead of a percentage of the commission. This flat fee commission arrangement between brokers and agents is what is referred to as a “100% commission brokerage.”

Once a real estate agent decides that the 100% commission brokerage model is right for them, they have several options to consider when choosing the right brokerage.

Does the agent want to pay monthly fees? Many 100% commission real estate offices charge a monthly fee, but some don’t.

Is errors and ommissions insurance included in the flat fee or is is paid separately? Find out if the E&O fee is included in the flat fee or paid separately, If it is paid separately find our how much and how often.

Is there a workspace or conference room to use?

Is there any sort of application or initial fee to start with a 100% commission real estate brokerage?

Can you buy or sell your own home as a real estate agent with a 100% commission real estate brokerage?  Some brokerages have rules against this and require agents to use another agent within the brokerage to represent them on their own home sale.

Is there broker support, and how often is the broker available?

These are the basic questions that should be asked by any prospective agent looking for a 100% commission real estate brokerage.

Balboa Real Estate does not charge monthly fees. Errors and ommissions is included in the low flat fee.

To find our more about our 100% commission brokerage, please CLICK HERE

 

 

 

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