Three Mistakes Devouring Home Selling Profits Today.

Market conditions are fluid. We’re all familiar with seasonal, supply and demand, and consumer confidence changes that swing the pendulum of advantage between buyers and sellers of goods or services. 

We consider today, 9/21/2021, to be a Seller’s Market in the Madison, WI area. But that’s a large geographic area, and within that area are thousands of mini-markets with more or less potential to increase your profit and decrease risk when you put your home up for sale. 

Profit. 

We hear about people paying over the asking price to get offers accepted. Those offers increase the profits of home sellers beyond their expectations. Would you care to know even when you get a bid over the asking price, you may not be getting the maximum profit available? How much, you ask? I will show you:

  1.  Promise to Pay a Set Commission to a Buyer Agent. Ninety percent of sellers in a non-scientific review I made recently reported that they paid a buyer agent a 3.0% commission to represent the buyer who purchased their real estate. Three percent is a high-water mark that’s been around for decades, with few exceptions. The most costly mistake home sellers make is promising to pay a set fee of 3.0% when they sign a listing contract, which is well before the day they see any offers. Homeowners who offer 2.0% to a buyer agent and reserve their opportunity to negotiate a higher rate will most likely increase their profit by decreasing their selling expenses. A four hundred thousand dollar house has at least $4,000 of commission to negotiate in favor of the homeowner. 
  2. Agree to fees that the seller always pays. Offer to purchase forms and contingencies are pre-written for convenience. Buyers and sellers have some expenses related to financing, closing, and transferring ownership. In a regular or buyer’s market, the buyer gets off easy, and the owner pays most of the costs to sell. Negotiate to move expenses from you to the buyer, and you can quickly reduce your selling expenses by $2,500 to $10,000. The high costs that the buyer could pick up are Title Insurance, Transfer Fee, property tax prorations, and commissions. 
  3. Agree to Contingencies. “The rest is just standard terms.” The presentation of the offer to the home seller by the licensee or the attorney gets overlooked. Those standard terms are mostly contingencies. Contingencies are included in contracts to allow the buyer to complete their due diligence before being committed to closing. That accepted offer with contingencies is the buyer’s opportunity to eliminate competition and shift time to their advantage, setting the stage for renegotiating everything, including price. All contingencies are not crucial to everyone. As long as a person can leverage you into negotiating, the terms of your offer are at risk. Contingencies are often satisfied to the favor of the buyer by the seller making a financial concession. Two thousand dollars is a typical concession. 

Let’s do the math.  

Mistake 1. Promise to pay a 3.0% commission before seeing the quality of the Offers. $4,000 (or 1% of the sale price)Mistake

2. Agree to pay fees that the seller typically pays. $2,500 +

Mistake 3. Agree to unnecessary contingencies. $2,000

A conservative estimate of profit to be made by avoiding three common mistakes made negotiating is $8,500. I know people are making unusually high profits due to accepting offers well over the asking price. It’s not my business to decide how much profit is enough. It’s my responsibility to show you where you can make a profit, so you have the choice to determine the amount of money you keep from the sale of your home. 

These three mistakes are easy to avoid when your agent knows the contract.

Essential Real Estate Service

There are hundreds of things a real estate firm might do, but not all of the activities are for the benefit of their clients or customers. And only a few activities are services that require a real estate license. The majority of tasks done in the process of a consumer’s interaction with a real estate firm are administrative chores. A smooth transaction and satisfactory experience results when all of the work is done timely and with skill. The end result is intended to be more than just good. Because good-enough is not good-enough, the admin work is important. It’s just not essential real estate work.

The duties of the real estate broker and licensed agents are spelled out in the Statutes. Admin work is selective, the duties prescribed by law are not. The consumer participates in the chores. Hourly employees conduct many of the activities such as staging a home, pricing, photography, paper processing, scheduling appointments. Handling admin chores poorly is not acceptable, but they may be hardly of any consequence to whether or not the sale closes.

Handling the essential real estate services poorly carries tremendous consequences. If the job requires a license you can assume there are skills required, and rules of engagement. Failing to exercise skill or play within the rules can be catastrophic to the transaction’s outcome. And if not catastrophic, expensive in loss of time and money is almost certain.

We created Essential Real Estate LLC to be the firm that strives to make better use of the contracts, and negotiating opportunities for home sellers and home buyers. The advantages a consumer can experience when their broker knows the contracts and contingencies are significant. Giving away leverage because you agreed to a condition that your agent didn’t comprehend happens every day, but not with us. We make it our business to help our clients get into a commitment with well qualified, and highly committed people. We work smart to identify the people committed to closing on the terms they agreed to and separate those who aren’t.

The essential real estate work is contract work. It’s negotiations. Confidentiality is a contract and license law responsibility. Our clients should expect a higher level of attention to the work that requires a license. They should also expect to see a more satisfactory profit after the closing.