Matching Intentions Will Get Your Offer Accepted

For at least three years running the market has favored home sellers in the Madison, Wisconsin area market. With too few homes for sale and a deep pool of able buyers, it’s common to see 5-20 people bidding on homes just listed. The odds of getting your Offer accepted, even at 1 in 5, appear precarious. At Essential Real Estate, we believe the odds are not as daunting as they appear when you eliminate the offers from people who have intentions that don’t match those of the seller. I contend the unintentional buyers account for at least 3 out of 5. If I’m right, your odds of outbidding (without overpaying) competitors are pretty darn good.

Set My Equity Free

Different motivators cause a person to put their home on the market, but the reason the house is for sale is always this: The homeowner wants their home equity to do use for some other purpose than own this property.  Some people decide to sell and put their homes on the market before committing to doing the next thing, but when they commit to whatever comes next, their intent becomes clear; set their equity free.  

The Accepted Offer Goes To The Intentional 

Our buyer clients who are sincere about their intentions are more likely to accept ideas on how to structure their Offers to match what we know of the seller’s intent. The intentional buyer can show by the terms of their Offer that they are committed to getting to closing on time with no risk to the seller. Reservations, (conditions that allow for a buyer to change direction before closing) threaten the seller’s security of achieving their reason for selling. 

Unintended Consequences  

We can’t blame home buyers for submitting wishy-washy Offers. The typical person drafting an Offer sees the purchase agreement as a standard-fill-in-the-blank form. Common contingencies make their way into Offers because the buyer was not aware of their opportunity to make an informed decision on the merits of everything stated in their Offer. The unintended consequence is a rejected Offer or a counteroffer for more money in exchange for the risk the buyer’s Offer expects the seller to carry. 

You Want Your Equity. I want you to have it. 

Showing the seller that you want to own their house is not the same as showing the seller that you wish to satisfy their want. Put yourself in a better position with this perspective: If I’m selling, I want my equity. I also desire certainty. Every seller might say this: The buyer I am willing to enter into a contract with is the person who wants me to have their money to become my capital and wants me to get it without stress. 

Letters, texts, emails do not tell the seller that you want them to have your money as their equity. They say a lot about you wanting something they have. They say something about what you want the seller to do for you. In a seller favorable market, the seller might be interested in your wants, hopes, dreams, but they’re more interested in your money and what you can do for them to make the process a sure thing for them. Your Offer can be structured to match the intentions of the seller. Those are the Offers most likely to be accepted. Know your intentions. 

Real Estate Information. The Business of Status Quo.

As an industry leader, NAR’s role is to continue to promote and enhance the REALTOR® value proposition and ensure that consumers continue to receive the best, most accurate and comprehensive real property information directly from the professionals who create it, REALTORS®. https://www.nar.realtor/2020-nar-strategic-priorities

Accurate information is valuable to the user regardless of the provider. Owning and sharing accurate information is necessary for the provider to remain relevant. Sharing information is not something the REALTOR Associations have do well. Is being the first point of contact essential to the REALTOR’s place in the transaction? Probably not unless keeping the status quo is the objective of the Association.

Maintaining the status quo is dependent upon the leadership’s ability to be the enforcer. The trouble with the enforcement of standards that protect a business’s position in a consumer transaction is the pesky fair trade laws. Whether the consumer is best off with the REALTORS being the first point of contact in a real estate transaction is determined by the consumer. If demand is a driving force behind business development and businesses are competing for the point position in real estate information, we might conclude the public is not satisfied with the status quo.

If REALTORS want the public to see them as essential to the real estate transaction the REALTORS will have to find ways to be exceptional. Data has value. So does intelligence and creativity. If data is your intelligence, you’re not very creative. Or, essential.

I don’t want to buy if or unless…the extreme cost of contingencies.

Stop right here. Let’s rethink this. Opportunities to reconsider a promise are necessary for uncommitted people. Every contingency in a residential offer to purchase says,  I don’t want to buy your house if this or that happens or doesn’t happen. Does it seem reasonable that home sellers will expect more money to exchange for more opportunities for a buyer to decide not to buy?  

Twenty pages to say MAYBE

The offer to purchase from a ready, willing and committed person could read, I will buy your house on this date, for this amount of money, which I will bring to (this place of closing). To complete the sale, you will transfer the property by a warranty deed and provide insurance of a clear title. 

A Wisconsin Residential Offer to Purchase includes at least 17 statements of I’m not going to buy your house if, or unless _________.  A typical four-page addendum of optional contingencies has 20 additional exit opportunities. Compared to the two-sentence promise of commitment, the contingency laden offer typically drafted by real estate professionals is one giant Maybe, maybe not. There is nothing safe in a maybe. 

The Price of Maybe

Security is valuable to home sellers. When a person writing an offer doesn’t know how to structure the offer to show the buyer’s abilities and commitment to close, all they have left to appeal to the seller is money. And the money they use belongs to their client. When homebuyers overpay, they’re spending equity they haven’t made yet. When real estate firms put more effort into customizing purchase agreements and less energy to capture leads, their buyer clients will reap the rewards. Until then, you’re going to pay for the right to walk away in cash or rejection.

Essential Real Estate, for people who want to keep more of their home equity.

We’re not for Everybody. Some people don’t care about their financial well being. Saving money, spending wisely, getting more for a dollar might be a way of life for some folks, but not everyone. Essential Real Estate, LLC exists for home sellers who prefer to keep more of the money they’ve accumulated in home equity.  

Built to Increase Your Bottom Line

The typical American home seller has a mortgage that is less than the value of their home. The difference between the debt and the market value of a house is home equity.  This equity is the pool of money drained to pay the costs and fees associated with the home sale. A broker commission of $24,000 might be 6.0% of a $400,000 sale, but if the equity is only $100,000 after paying the mortgage, the commission is a whopping 24% of available cash. When we look at broker fees as a percentage of home equity, we see a problem worth solving. Essential Real Estate exists to decrease the costs of selling a home and increase the bottom line of the home seller.  

Smart Pricing and Smarter Negotiating

Home equity is lost when we pay for non-essential or overpriced services.

Essential Real Estate charges $499 at the time the listing contract is signed, and 1.0% of the sales price at closing. We help our clients make a smart decision about the amount of money they promise to pay to a buyer agent. Our average client pays a total of 3.4% of the sales price in broker commission. The difference in dollars compared to a person who pays a 6.0% commission is about $10,000.  

Home equity also gets burned up in unwise negotiating errors. Clients of Essential Real Estate get wise advice to avoid the trips and traps hidden in purchase agreements. The home seller who commits to an Offer that allows the buyer opportunities to renegotiate price and terms later when all other buyers are gone could be spending their home equity dollars, again and again, to get to closing.  

It’s About the Equity

We built Essential Real Estate for (1) people who want to keep more of their home equity for themselves when they sell, and (2) people who want to get their offers accepted on homes they want to own, and do it without overpaying. The way to buy without overpaying is knowing how to structure a proposal to give sellers the security they desire more than the money. We do this every day. 

Real Estate is a Compliance-Based, Standardized Business…The Agent is Easily Replaced.

The more we work to standardize the real estate purchase agreement, the closer we get to eliminating the real estate licensee from the transaction. 

Programmed computers are better than humans at compliance-based work. We prove we believe this by suppressing innovation and forcing licensees to check the same boxes and write the same words in the blank spaces, with little regard for their customers’ and clients’ circumstances. To see this in action, attend a real estate training session, or sit in on a forms committee meeting. Talk to REALTORS. Ask them WHY they check this or that box, include this or that contingency, and fill in this blank but not that one. The answer is likely to be a version of “That’s the way we always do…we were taught to do that.” It doesn’t matter if they are relatively new or seasoned licensees; repetition and standardization eliminate the opportunity for customization.  

Ask the leaders of the committees assigned to revising the existing real estate forms why they choose to include standardized contingencies where there had not been one before? Is simple and the same better for the consumer? How do we know?

The Price of Simplicity

 Without thinking and customizing purchase agreements to the situation, and the parties’ personal preferences, the differentiating factor between offers is the price. And when the price is the only way to differentiate, the consumer will pay higher and higher costs. When the consumer can find something less expensive and more effective than the common real estate licensee, they will turn away from REALTORS and run to the innovative, robotic alternative surely to become available sooner than later. 

Think. Customize. Learn. Resist Becoming Trained.

When the real estate industry looks at their business from the perspective of delivering a better product to the consumer, standardization and repetition will be seen for what they are; detrimental to the consumer and the broker. Tech giants see the future of real estate is in robotics and AI. The non-thinking, box-checking licensees, will be out of work. The computers can pick the boxes to check and the words to write in the blanks, and they can do it more accurately than humans. Those who have a future as a real estate licensee will be the people who think, learn, customize, and contribute to the consumer’s better experience.    

Will Your Home Equity Buy a Tesla For a REALTOR and a Fiat For Their Kids?

Home equity is the buried treasure of most homeowners. Other than borrowing, we uncover the gold coins by selling the home it’s buried beneath. Regardless of what we will do after we exchange the deed for cash, you and I, and all of our friends, sell for the same reason- free the equity to do the next thing.    Other people get their hands on our home equity treasure by selling our houses.

At the time of sale, our opportunities to increase our equity are over. What’s there is there, and the money owed reduces the balance we have to do whatever we have planned for our investment. The way to increase our net equity is to decrease our costs to sell. Your most expensive selling cost might be the real estate broker fee. Like a regressive sales tax, a broker fee (commission) based on a percentage of the sale price consumes an unfair share of home equity for people who can least afford it. 

 How 6.0% becomes 24.0%

You and I sell our homes for $400,000. We sell with the same real estate broker; she charges you 6.0% of the sale price, and she collects the same 6.0% from me. On our closing statements, you and I see the same real estate commission of $24,000.00. Everything is equal. Or is it? Probably not. You have a mortgage of ZERO. Your gross home equity is $400,000. I, on the other hand, have a mortgage with a balance due of $300,000. My home equity is $100,000. Your $24,000 broker fee is only 6.0% of your home equity. For me, I will need 24% of my capital to pay the broker.

You pay for lifestyles that are not your own.

BMW. Volvo. Audi. Range Rover. Tesla. You may not own one of these luxury automobiles, but if a REALTOR is driving one, someone’s paying for it. In a driveway sits a Suburban, a Jeep Wrangler, a Tesla, a Fiat. Upon parking the Fiat and exiting the car, the REALTOR-owner announced, “The last person out of the house in the morning gets stuck with the Fiat. It’s the kid’s car.” To people who want you to believe the car they drive are an indicator of their success, getting stuck with a $30,000 Fiat is as bad as it gets. I can point to a few incidents that opened my eyes to why the public needs alternative real estate solutions, and this was one. There is something wrong with taking large chunks of equity homeowners could use for the well being of their families and spending it on luxuries for our families. The real estate market runs at a pace where the least capable licensee can collect expensive cars to appear successful, and take 24% of your earned savings, doing nothing more than signing a listing contract. 

Know where your money goes

Cars, trips, real estate, luxury goods, self-promotion, lead generation, client appreciation parties, pre-game tailgates, fundraising for clean water for wealthy lake property owners become business expense write offs for some brokers. Your home equity is the revenue they use to pay the bills. Fortunately, as more brokers create alternative real estate business models, the homeowners and buyers will have a choice to keep more of their money for themselves and pay less for the lifestyles of other people. It’s essential to know the fee the broker charges and where he/she will spend your money. When your dollars are spent on luxury cars that you don’t drive and vacations you don’t take, you have the right to know where the money will go. 

Essential Real Estate’s $499 and 1.0% broker fee means more equity for you.

Buying things you don’t use is never a good idea. Buying those things for other people is charity you can choose to be part of of or not. Essential Real Estate was created to give home sellers a choice to keep more of their home equity and pay less in real estate broker fees. It’s not just the listing side of the commission where our clients save. We busted the myth of the 3.0% buyer broker commission. Our home selling clients are paying an average of 2.4% commission to buyer agents. For the person selling a $400,000 house, that little .6% is a big $2,400. Financial security is achieved by saving and paying fair prices for quality service. As long as real estate broker fees are negotiable, expect to negotiate. And if negotiating isn’t your thing, call us. We negotiated a lower broker fee and better selling terms for all of our clients. $499 plus 1.0% of the sales price is our fee. You decide how much you want to offer to a buyer broker. More of our clients offer no more than 2.0%.

Sellers Pay the Cost of the 3% Myth… by the millions of dollars.

“…So if you offer 2%, this agent may not encourage their buyer like they would if it was a 3%…” From a Wisconsin Real Estate licensee. July, 2020.

Myths can not always be proven, but they can be busted.   The myth perpetuated in the residential real estate sales business most costly to the public, and rewarding to the brokers, is the myth of the 3.0% commission. There is no proof that real estate agents choose to show homes where the commission offered to them is 3.0% over homes where the commission is 2.0%. There are people who believe they have evidence that 2.0% is a disincentive, and all they really have is an opinion. Why doesn’t the real estate community want to bust this myth?

A recent search of the RASCW MLS showed of 3,277 residential sales priced from $274,000 to $600,000 only 749 sales closed with the buyer agent paid less than 3.0% of the purchase price.* 

Millions of Dollars Skimmed from Home Equity.

If the average sale price of these 3,277 properties is $370,640. Owners who committed themselves to pay a buyer broker 3.0% of the purchase price, paid $11,192.00 just to the broker on the buyer’s side of the transaction. (That eleven thousand dollars that ended up with the broker came out of the owner’s home equity. We’re talking about real money.)

If my math is right, only 208 transactions closed with the seller paying 2.0% commission to the broker on the buyer’s side. At an average of $370,640 per sale, the commission paid on each of these sales is $7,413.00. Before you give $3,740 of your savings to a real estate broker, let’s be sure the money is better off in their hands than in yours. Maybe a conversation with an agent in an interview would be to get their opinion of why your money should become their money. (When 2,528 home sellers pay $28,293,376.00 in 3.0% buyer-side commission instead of 2.0%, they might be giving away nearly ten million dollars without realizing they had a choice. )

What’s That Offer Worth?

Until an owner sees an Offer they are wise to promise to pay nothing, or at least hold something back. You can offer to pay 2.0% and always move up if the terms of the Offer are attractive enough, and you have not better options. In a seller’s market you’re likely to have options. Sellers who offer less than 3.0% commission to buyer side brokers have a good chance of saving a few thousand dollars of their home equity for themselves. If you have a better use for $3,000-$5,000 of your money don’t give it away until you know what you’re getting for your money. 

*Statistics obtained from the RASCWMLS 7/14/2020

Save About $10,000 in Real Estate Commission for Yourself

Let’s assume your home sells for $300,000, and your realtor charges a commission of 6.0% of the sale price. Eighteen thousand dollars is the price you will pay for the real estate brokerage service in this transaction. If you are like the typical home seller, you probably do not have $300,000 in home equity (that’s where the money comes from to pay the commission). Maybe you have $100,000 in equity. Eighteen percent of the money you have saved in home equity is going to go to real estate brokers? And then where does the money go? 

Expenses are Not Necessarily Essential

There was a day when real estate firms needed office space for their agents. The larger the firm the more square feet and locations they need. The bigger the office, the larger the parking lot. Those days are gone. People didn’t quit being REALTORS, they didn’t quit driving cars, and they don’t car pool to get to the office. So why are the parking lots of large firms mostly empty? REALTORS stopped going to the office. (The broker may pay less in their monthly coffee bill, but rent and staff expenses haven’t decreased.)

Not all expenses have anything to do with selling your house.

When was the last time you sat down with the Sunday paper to scour the real estate section? (Last week in Antigo.) Do you remember The HOMES Magazine, The Real Estate Book? Where’d those go? They went to the same place travel agents disappeared to; the World Wide Web.

Print advertising was expensive. Brokers couldn’t afford to advertise all of their listings each week and larger firms could easily spend multiple thousands of dollars a week in newsprint…more if you added color. Print advertising was an enormous line item in a broker’s budget; not today.

Essential Real Estate represents people, we don’t chase leads.

Advertising on the internet isn’t free. And brokers do pay to play on the internet. They pay your real money to play. But the game they’re playing is called “Lead Generation”. It works like this: You land on a real estate for-sale site, click on a house, spend a very little bit of time and you’ll be asked to give up your name, number, email, and address. When you give away your identity, you are captured. And then, you’re sold to multiple Realtors who paid to play. These folks compete to convert you to a client and a paying customer. (Essential Real Estate does not play the lead game.) As repulsive as pursuing, capturing, and selling people sounds, ask real estate companies to tell you about their lead generation systems. Sixty thousand dollars a year can easily be spent o staff time, and subscription fees. $60,000 is a likely figure for a mid-sized firm to invest in chasing people who don’t intend to be captured.

Your Equity Is Not Saved To Be Squandered

Before committing to a Realtor, home owners are told to ask questions. I know that because I’ve been answering those questions for decades. (The questions you’re told to ask aren’t the best questions you could ask.) You can tell values by seeing action. The action of spending your home equity dollars is found in a broker or agent’s business budget. Advertising, promotion, and other business expenses can be broken out to show dollars spent on company and individual agent image, and name recognition advertising. Property listing advertising is easy to track. If a broker is going to spend 50% of the $9,000 you paid them on promotion, wouldn’t you feel better if more than a few dollars of your home equity was invested in promoting your home, and not on the broker or the agent’s image?

Know Where Your Money Goes

Twenty thousand dollars of your home equity can be divided up by your broker or by you. Cars, houses, vacations, education, investment, philanthropy, entertainment, boats, savings, health care, insurance. There is no end to where your home equity can be spent by someone. Essential Real Estate charges $499 and 1.0% of the purchase price to represent you in selling your home. We built our service to give you more choices to keep more of your home equity. We do not chase leads, self promote, or advertise our image. We do not spend your equity on office space, utilities, staff, or expensive material things. All of our clients who sell real estate with us keep thousands; multiple thousands, of dollars of their home equity to invest in their lifestyles.

A recent client kept $8,651 of their home equity selling on our plan compared to a 6.0% plan. Another saved $9,701. And, another kept $11,501.

Paying Only for Essential Real Estate Service is an Innovative Idea.

Sixteen percent of the population are Innovators and Early Adopters who get-it. The remaining 84% follow.

Be an Innovator and Early Adopter, the Majority wait to follow you.

Discussing real estate commissions is not a violation of fair trade. Colluding to establish a set price among practitioners is. Few topics raise the ire of Realtors like questioning commission rates. When you think about how many real estate agents, with vastly different education, experience, track record, live in any community it’s worth asking how the fee brokers are likely to quote remains consistent for so many years.

Real estate markets, REALTORS will tell you, fluctuate. Today your house is worth X, next spring in may be worth Y, or Z. Why is it that real estate broker fees don’t fluctuate with markets? For example, immediately prior to the recession broker fees in the firms I worked at charged 6.0% commission to sell a home. During the recession, when homes lagged on the market for months, the fee was the same 6.0% of the sale price. In 2016 we had clearly emerged from the recession yet rates held at 6.0%. By 2018 when the median days on the market dropped to a matter of hours, a rate tied to the market would drop. That didn’t happen. The days on the market are still counted in hours, and if you call any three firms that come to mind and ask them what they charge let me know what you find out. This I am sure of, regardless of the proven skill of agents in a firm, the commission rate will not fluctuate. The last person off of the turnip truck will collect the same commission as the agent who works smart to learn what only a few in the industry strive to learn.

Innovative ideas are offered by the pioneers who aren’t afraid of push-back from peers who feel threatened. The innovators are the few who are first to reap the benefits, and the early adopters are close behind. These are the fearless leaders. They have a problem, know they have a problem, and they’re going to take action to solve it. Because they take action the rest of the world becomes less comfortable with living with “the problem” and they adopt the solution.

There is no such thing as “limited real estate service”. If it’s licensed real estate service, there can be no limitations. You’re either providing real estate service o you’re not. “Full service” is equally peculiar. There is not a chance in the world for an unskilled licensee to provide the same level of competent service as a skilled practitioner.

Today it’s common for on real estate firm to represent themselves, or other brokers, as full service or limited service. I don’t know what is intended by everyone who uses those terms. I do know this, Essential Real Estate is an innovator in real estate service pricing. The innovators and early adopters who are our clients are leading the way for the majority to benefit one day. The way for innovation to spread and be accessible to more people is for the early adopters to share their experience. The majority of the people in any community depend on you to tell them it’s OK. And in this case, it’s Okay to keep more of your home equity, and pay a lot less in real estate commissions.

Your Radon Test Contingency Landed You in Second Place

The radon testing contingency, as currently written, is unnecessary. Including it in your offer may be why the seller rejected your offer to purchase and went with another. Before you weaken your offer with a misunderstood condition, get the facts and opt for making your home a healthy home. Expect to install a mitigation system. Let that sink in…  

Did I say radon is not a serious health risk? Did I say the radon level in the home is or will be at a safe level? No, I did not. Let me expand on that. RADON IS A KNOWN CAUSE OF CANCER. EXPOSURE TO HIGH LEVELS OF RADON GAS INCREASES YOUR CHANCES OF GETTING CANCER. RADON GAS IS PRESENT EVERYWHERE. RADON GAS GETS TRAPPED IN OUR HOMES, OUR APARTMENTS, OUR OFFICES. EVERYONE SHOULD KEEP THEIR HOME HEALTHY AND SAFE. A RADON MITIGATION SYSTEM IS INEXPENSIVE AND EFFECTIVE.

Okay. Everyone who knows a cancer survivor or person who died can relax. I agree with you. If you have a choice, living in a home with a radon level below the EPA Action Level is a wise choice. The EPA makes it clear; a long term test is a more accurate way of measuring your in-home exposure to radon. Forty-eight or seventy-two hours is not long term. However, home sellers are unlikely to allow you time for a true long-term test in the home buying process. I am concerned that too often home buyers who get one of these two or three-day tests with results below the EPA Action Level conclude their home is radon safe, and they take no steps to protect themselves. That’s dangerous and avoidable.

A Better Strategy

Radon mitigation systems are simple They’re made with inexpensive PVC pipe, a hole through the concrete basement floor, an electrical outlet, and a $125 fan. Guaranteed to keep the indoor radon level below the EPA Action Level, the system might cost as much as $1,000.00 installed. The radon test a buyer pays for will be about $200.00. Considering it is common practice for agents to write offers with a provision that the buyer promises to not object to defects under $2,000, it makes no sense to weaken their offer by inserting a radon testing contingency.   

Uncertainty is Unnecessary

When market conditions favor one side in a transaction, the favored team does not have to expose themselves to uncertainty. I’ve heard agents say otherwise, and if they were right, I would agree with them. They’re wrong. Unless the owner is uninformed when comparing offers, they will prefer less risk to any risk. Allowing a buyer to renegotiate or have leverage later only happens when the seller has no options or poorly advised. 

Save your money—buy a mitigation system after closing

Does it not seem wise to save the $200, forego testing, and install a mitigation system after you close to ensure your level remains safer? Talk to the radon mitigation people. Find out how often they are unable to reduce indoor radon levels in homes at the cost of more than $1,000. If I’m wrong, please tell me.