Author: Tom Meyer, Owner-Broker, Essential Real Estate, LLC Madison, WI

The real estate transaction, disclosure, and confidentiality are the business of a Wisconsin licensee. It's in the transaction where the skill of the licensee, and their commitment to the law where the public is protected or placed at risk. What you see REALTORS do to brand themselves and their firms, promote their service, advertise, and process paper do not require a license. I believe negotiations to create and honor a real estate purchase agreement is where the agent has the greatest value in a transaction. Paying professional fee rates for the administrative services is a choice consumers deserve. Old business model driven commission rates are taxing the home equity of American home sellers. Essential Real Estate was created to put more money in the hands of the consumer by eliminating expenses for the firm and charging a fair price for the real real estate service.

You are not in competition with multiple buyers

Listing agents are not fibbing when they say they have multiple offers in hand. They’re not trying to trick you. They are following the lawful instructions of their client. What another person and their agent do with that information is up to them—doubt at your own risk.

Even in a pandemic, homes are attracting multiple offers. Three to five offers are common. The most I recall from this year is twenty. Even with nineteen offers already in, our client did not compete with even one of the bunch. And I say that for two reasons.

First, competing is a mindset; it’s not a real thing. Choices are real, and by making decisions based on the information and knowledge of their intent, our clients submit offers that aren’t trying to beat anyone; the offers they write are the offers others have to overcome.

The prepared buyer client we represent believes they can show their commitment to owning by what is or isn’t in their Offer. An owner who values a committed buyer who gives them terms that allow them security and a satisfactory net is likely to commit to that buyer. And I know this because it happens most of the time.

The second reason our clients are not competing with others is that 9 out of 10 offers an owner receives will not be written clean enough for the owner to accept. Either the Offer will have flaws or deficiencies, or unnecessary contingencies. The Offer that a seller can take without a counteroffer and leaves them in a secure position knowing the buyer is as committed to getting to closing as they usually stand alone when compared to all of the Offers on the table.

Did our client’s Offer stand out from the other 19 in the case I mentioned above? Yes, it did. This family wrote one Offer on one house and now own that home. They trusted us. They didn’t compete. And, their Offer was not for the most money.

Why Essential Real Estate Exists.

Massive improvement of service by resolving a tiny fraction of a problem.

There are a thousand things a real estate firm can do and call themselves full service. The more sizzle they add the better to justify their fee. A broker who charges 6.0% commission (Same fee as has been common since at least 1989) has a budget and they pay those expenses with the money you pay to the broker…where does your commission paying money come from?

You Pay Commission and Costs From Your Home Equity

A 6.0% commission charged on a $400,000 sale is always $24,000. But you don’t pay that commission from the sale price; you pay it from your home equity. The typical American may have 50% of the sale price in home equity…but most will have less. If that’s you, the 6.0% commission is 12-24% of your home equity. And to us, that’s an excessive amount to pay for the typical real estate transaction service.

Ask to see the budget of any real estate firm or licensee. You will discover that the home equity you pay to the firm is spent on technology for Lead Generation, and lead capture services. (Getting more customers like you is the business of lead management.) Your equity also pays for Branding. Name recognition. Promotions. Entertainment. Rent. And paying redundant staff expenses.

Essential Services are License Law Compliant

By directing a high percentage of effort and attention toward excelling at the essential aspects of real estate license law, transactions, and negotiations our client receive a higher level of skilled client representation; they pay only for that skill and knowledge. Essential Real Estate excels at providing the truly vital services necessary to present your home to the home shoppers. (Staging consultation. Professional Photography. Matterport 3D images and floor plans. Multi Dimensional, fast loading virtual tours. We’re not going to do a thousand different things that really won’t contribute much to the end result we are trying to achieve…and you certainly don’t want to pay for those things.

Where Do You Find Homes For Sale?

Research shows 80% of people who bought homes recently used the internet to find the home they bought. They mostly do this searching 24/7 from the comfort of their home on their smart phone or tablet. Massive corporations like Zillow.com, Realtor.com, Homesnap.com, Facebook, Instagram, spend billions of dollars developing their technology to match homes with prospective buyers. There is not one real estate agent or firm that can compete with attracting qualified buyers to you your home through their web site or social media. That’s good news for you! Every single home for sale on a multiple listing service in America can be included in the feed to these gigantic home buying portals loved by home buyers all across the globe.

Marketing?

For 6.0% commission paid from your home equity you will buy a lot of sizzle. There may be a day when your home for sale is lost in the forest of other homes for sale again. But that’s not the present market. Look around your neighborhood. How many homes similar to your home (or just number of homes) are on the market in your neighborhood? If your home is for sale you’re like that lone tree in the middle of the farmer’s field; you’re see from anywhere and you can’t be hidden. At any time you are the market for homes for sale in your neighborhood. Spending money on random advertising and promotion on social media to a few people who have no interest in real estate much less owning your home is a terrific waste of money.

Color glossy handouts. More and more double sided color glossy handouts are printed, paid for, and delivered to the broker from the printer AFTER the owner accepts an offer. These handouts look sharp and it’s stunning how home owners light up when they see their home on an 8 x 10 color glossy. And why is this a necessary expense to the home seller? It’s not. Home buyers are more environmentally conscious and they don’t take these flyers—they have more information on their smart phone than anyone can put on a paper flyer.

There Is No Waiting To See Your Home

The consumer is not waiting to hear about homes for sale from a Realtor. They’re actively looking and being looked for by home buyer matching algorithms; and these systems are constantly improved at no cost to you…or your Realtor.

Flat Fee? It’s All Flat Fee…and limited service.

Real estate licensees are turned out in great numbers. For a minimal fee and extremely limited education requirements a person can hold a Wisconsin Real Estate Sales or Broker license. This license is no indication of a person’s skill, knowledge, or commitment to real estate license law. Experience is a misnomer. A license and experience could be an indication of a higher level of ability. When you consider that real estate is a Training intensive business, not a Learning business, the chances are the licensed experienced person and the licensed limited experienced person know the same thing about filling in the blanks and checking the boxes of an offer form. The training method works well for brokers. If they can get a person to memorize what goes in this line and we check this box but not that box, very little time and resources are invested in getting the agents to the minimum level of competence. If that’s fine for a broker it should not be fine for the public.

We hear the term flat fee and wonder what isn’t a flat fee. $4000.00, 3.0%, 6.0%, $500.00 are all flat fees.

You Get What You Pay For

And we believe you should pay only for the things that matter. When a company sets their fees to make a profit after expenses you the consumer are paying for those expenses whether you want them or not. To add services to justify a 6.0% commission it makes sense to expect there will be a lot of low cost-no impact services tacked on. (That’s what brokers call sizzle)

We Exist So You May Keep Your Equity

You worked smart to build the equity you have in your home. We believe you should keep more of your equity and spend less on real estate services and costs to sell. If you’re willing to spend more of your money on nonessential services we’d like you to make an informed decision. Our clients make informed decisions; they get the inside information on how the business works and where they can improve their outcome and save their money. We created Essential Real Estate to be the preferred choice real estate firm for people who value their home equity and desire to have skilled real estate representation.

Our Clients are People Who…

Prefer to pay fair prices. Value highly skilled professional service. Know the difference between sizzle and steak. Have better use for their home equity than paying broker fees. Understand that it is the agent’s ability to negotiate the terms of an agreement that matter most in the outcome of their transaction. And finally, some but not all of our clients believe the home equity they save matters to them.

Essential Real Estate $499.00 plus 1.0%

Total and complete real estate service for $499.00 at the time of the listing and 1.0% of the sale price paid at closing is our fee. Most of our clients intend to pay an additional fee to a buyer’s agent and that fee might range from 1.0% of the purchase price to 3.0%. (We suggest moving up and down the scale using increments of .25%) The amount you commit to pay is up to you. We’re going to make sure you know how to decide on an amount to commit yourself to paying without promising to pay a higher fee than necessary. This little insight alone has saved our clients $1,000 to $8,000 in commissions.

Essential Real Estate is the only firm built to identify the essential real estate services, invest in mastering the contract and negotiating skills, while providing total real estate service. We do this by eliminating the junk service and focusing our attention where you have your attention, On Your Home Equity.

Control of Your Home Equity…Problem Solved

The reason to start a business is to solve a problem other people have. All different intents are outcomes. I’ve never heard anyone say; There are too few real estate companies. We need one more.  My son Patrick and I set out to apply our skills and talents to solve a problem, and it didn’t take long for us to identify a solvable situation.  

Inspired by the ideas of Seth Godin, Simon Sinek, and Malcolm Gladwell we began by asking “Why” questions. Why do brokers charge 6.0% commissions? Why do homeowners pay 6.0% commissions? The answers lead us to ask “What” questions. For example, What do brokers do with the commissions they collect? What do home sellers use to pay the broker’s commissions? What do home sellers get for the commissions they pay? More or less, the answers looked like this: Brokers charge 6.0% commission because home sellers are willing to pay 6.0%. The commissions are paid from home equity savings earned by the homeowner and spent to support other people’s lifestyles. So, what’s the problem? We believe the problem in need of a solution is as homeowners, we pay an unfair share of our home equity for overpriced real estate service from under-skilled practitioners who provide no discernable service difference, all of which achieve the minimum standards of the law.

Essential Real Estate Solves The Problem of Excessive Equity Loss

Broker commissions are a form of a regressive tax. Six percent of a $400,000 is $24,000 for everyone who sells a home for $400,000. The regressiveness is that the $24,000 is not 6.0% of the home equity held by everyone who sells the $400,000 house. It is 6.0% of their equity of they owe ZERO, but few homeowners owe nothing against their home. A typical seller of a $400,000 home might have $100,000 to $200,000 in equity. At 12% to 24% of a person’s equity, that broker fee is significantly more of a burden. 

Take Control of Your Equity and Expenses

Homeowners pay dearly because of two false beliefs about real estate commissions. (1) Real estate agents don’t decide which homes their clients see based on the commission offered to them. The same buyers who would see your house if you promise to pay 3.0% to their agent will see your home if you offer 1.0% commission to their agent, and there is no evidence to prove otherwise. That’s nonsense, and we can get more into why I know that’s a false assumption. (2) Commissions are not heavily invested in marketing your home. The lion’s share goes toward real estate broker self-promotion, capturing more buyer and seller clients, company overhead, staff, and lifestyle choices. 

The listing consultation you receive from us shows you how to take control of your home equity and your selling expenses. If controlling the spending of your capital sounds like a good idea to you, talk to us. Anyone can sell your home. We make sure the transaction is negotiated to your advantage with you keeping more of your home equity.

Essential Real Estate, LLC Leaving you with control of your home equity.

No I won’t agree to extend buyer’s appraisal or financing contingency.

As long as contingencies have existed, there have been REALTORs who think deadlines are suggestions. Since when has it been a home seller’s responsibility to extend an appraisal or a financing contingency when a buyer’s lender fails to deliver by the deadline? Never. And still, I hear from licensees who are astonished to have their amendments to extend rejected. I wonder if the agent who expects an automatic extension comprehends the mechanics of the contingency?

If the home buying process is like a journey from here to there, a contingency is an off-ramp, should the traveler decide to quit the trip or go a different direction. Those off-ramps are helpful for the buyer and not so useful for home sellers. As we move along the road from acceptance to close, we eliminate the off-ramp contingencies by satisfaction or by failure to act before the deadline. It’s possible for a contingency favoring the buyer to be desired by the home seller, but it’s unlikely. Whether the contingency is satisfied or becomes moot by the failure of the buyer to take action, it’s typically to the more significant advantage of the home seller to have the contingency gone.

Adding more time for the buyer to decide if they want to exit the transaction at a later date is unwise. Only an agent who doesn’t comprehend the contingency will think it’s prudent for a seller to extend a missed contingency. And don’t tell me it’s necessary to show good faith. Agreeing to a condition included is good faith. It’s good faith for the buyer to make sure they meet the deadline.

Overpaying should not be your best idea to getting an offer accepted.

Essential real estate service is contract drafting and negotiations. Beware of the professional who suggests paying more than the asking price as a first idea to get an offer accepted.

Ask any real estate agent or attorney to give you two ideas to get your offer accepted in a seller’s market. One idea they will say more often than not is “Offer more than the asking price.” Real estate professionals who believe overpaying is a viable option haven’t done enough thinking to earn trust, and they far outnumber the professionals who don’t use price as a first, second, or third strategy. Note of caution: You can’t tell who the agents are by looking at their age, sex, experience, or company.

I read a post by an agent who equated getting offers accepted to winning athletic competitions. Winning competitive races appeared to be her thing. I understand that competitive drive when it’s my game. Representing people in a real estate transaction is not a sport. When winning is the objective, what might be the costs? Well, for one, the agent who is inspired by competing to win is spending your money and your security to satisfy his or her self interest. I believe a safer attitude is to see the transaction as an opportunity for the client to acquire a home on terms they will be satisfied for long after the day their offer is accepted. For a person to know what the satisfactory terms look like it’s my job to show them the advantages and consequences of different agreement terms. When a person knows what is possible and can see possible outcomes, they make informed commitments. I’m certain that owning a home without overpaying in money or risk rates higher on the list than owning at all costs for most people.

Essential Real Estate is designed to give smart people reliable options to acquire homes without overpaying. Coming out of the recession in 2014 we committed to taking our knowledge of the Offer agreement and other firm’s addenda to the highest level; intending to use that knowledge to give our clients more ideas to give themselves an advantage when the home they want to own is the one more people want to own. There are hundreds of people who own homes they would have lost or paid too much for had we not learned and taught this negotiating strategy.

Anyone can write offers committing you to spend more than the asking price. That’s simple. It may be effective if by effective you mean getting your offer accepted and the agent paid. Our clients do not settle for just an accepted offer. They don’t expect a steal; they expect smart ideas to acquire a home on reasonable terms with the risk they can tolerate.

Essential real estate service is contract drafting and negotiating. It’s not easy, but it’s worth it when the cost is your money and your security. Before committing to working with us, or any professional, ask to hear ideas to help you achieve your goal and not lose your shirt in the process.

The Gift of Solitude

Solitude is the gift we may choose to receive when we accept the limitations of events we can not control. Life as we knew it ends swiftly with or without tragedy. Something as tragic as the death of a family member or as inconvenient as a stay-at-home response to a pandemic will leave a person alone against our will. Fifteen years ago I lived the tragedy. The pandemic related isolation reminds me of that spring-summer-fall-winter of 2005 in the way both experiences are doorways to the health benefits of solitude done well.

The solitude experience is peacefully invigorating. I do not believe good things come from tragic events. Good people who experience tragedy have a choice to accept what is and do good or resist and do harm. Whatever your feelings are about social distancing and work restrictions an alternative to anger and resentment is acceptance and exploring solitude. These opportunities are few and far between. There is nothing good about a deadly pandemic. Good people are choosing to do good for humanity all over the world. We are all not on the front lines but we all can explore doing something good for ourselves and people around us. Exploring solitude is free.

Real Estate Commissions. The beginning of the end of six percent.

 An Apple laptop in 1989 sold for $6,500.00; it carried all the power of 16.5 lbs of modern technology.   

In 1989, according to Zillow, the typical real estate commission charged to home sellers was 6.0%. To go from Milwaukee to Tampa, a travel agent booked our flight and found a hotel. The fee we paid was the cost of travel. 

In 2020 Featherweight laptops are a dime a dozen. We’re all travel agents, and we work for free. Real estate broker commissions are typically 6.0%. The last time you saw an advertisement by a real estate company for a house for sale was probably the last time you heard of a travel agent getting her real estate license.  

Even with the current pandemic, homes are on the market for relatively few days. It’s common to see a home under contract in less than six days on the market. What isn’t common is seeing broker fees charged at less than six percent of the sale price. Why is that?

I believe the six percent commission is immune to the pressure of technology, in part because the public accepts real estate myths; without demanding the evidence, and in part because there are too few options for home sellers. There were too few options in 1989 when I started my real estate career, and there are too few today. Essential Real Estate, LLC, is a new option we brought to the market, and it’s well-received. 

Before it was mandatory to work from home, real estate was a natural business to operate from home. Going to an office is not essential to conducting real estate business. Homesellers pay those office rents, and they pay it with their home equity. What advantage does a two-story office building offer to the transaction? What advantage is there to the client that the company has offices all over town or around the state? 

The key to making real estate service fees less of a drain on home equity is to keep overhead costs down and invest in transaction negotiation skill development. A smarter, more capable agent is less expensive to develop and much more of an asset to the public than bricks and mortar and leads capturing systems. 

Essential Real Estate’s Success Fee is $499.00 and 1.0% of the sales price at the time of closing. We counsel the home seller on the facts about offering a commission to a buyer agent. We believe it’s wise to provide something to a buyer agent, but it’s not necessary to give any set amount before you see an offer. The myth of the 3.0% buyer agent fee might be the most significant cost owners have been paying unnecessarily, if not forever, at least since Zillow came on the scene. 

The client who hires Essential Real Estate to sell a $400,000 home pays Essential Real Estate $4499.00. The amount of money the seller will pay to a buyer agent depends on the terms of the Offer, and the terms of the Offer rely on the competition we generate. A reasonable expectation is $8,000. In this scenario, the owner pays a total of $12,499.00 in broker fees. Compare that to a six percent fee of $24,000.00. Essential Real Estate is a full-service broker. We don’t discount our fees. We charge a fair price, but we only charge for the real estate license work. Isn’t that what you expect?