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.

We Own The Means For You To Keep Home Equity

We own the method to increase the home equity our clients attain and retain.  Patrick Meyer, Owner. Essential Real Estate, LLC. 

A quick count shows our home selling clients retained more than $80,000 of home equity using our method. Estimating the amount of capital our buyer clients attained is not as precise. Although we do know some of our buyer clients succeeded in negotiating accepted offers even when they were not the highest price offer the seller had to consider. 

This year our home selling clients leveraged our equity saving method into an average of over $9,000.00 each.  

Home equity is serious money. Nine thousand dollars invested for ten years at an annual return of 6.0% becomes $16,117, a beautiful college fund gift. 

We intend to change how home sellers keep their home equity and how home buyers avoid spending equity by overpaying when they negotiate.  

There is always another house and another buyer.

Real estate negotiations are ordinary in that they are not complicated. With exceptions, a typical transaction includes someone trying to pressure someone into fearing a loss. Either the buyer agent tells the seller the buyer has another property to consider. Or, the seller has other interested buyers. For this strategy to have any effect, the other side needs to participate. And by participate, I mean they have to be afraid of losing.   

Don’t participate, and the other side will stress.  Fear of loss is a great motivator. Being unafraid is a great equalizer. To be fearless, have a plan, and trust your knowledge. Overcoming the threat of loss is as simple as ignoring the suggestion of an impending loss. Trust what you see in the Offer. Buyers rarely write offers first on their second choice homes. They seldom walk away from one house at the sight of the first counter offer. And when they do, it’s reasonable to conclude that their commitment was weak. Getting into a contract with an uncommitted person is less desirable than no offer at all. If you’ve been there, you know. 

You have a plan, and you know what you know. You know what you want to accomplish, and you know what will or won’t work for you. As long as you have an offer in your hands, you are in control. The other party that made the Offer you are considering countering isn’t as committed to getting to closing as you are. If the only way they will get into a contract with you is if you accept their terms, they may be an inch away from dissolution.  

A secure contract with your preferred closing date and terms you can live with is worth trying to get. The Offer in your hand that comes with implications of not-so-committed is nothing to fear. Be committed to yourself. Say thank you for the Offer and let the agent know you appreciate the opportunity. Show no fear. Display no displeasure. You’re in control. Keep it that way. There is always the next buyer. 

You are the product or the client; sold or served. Which one do you want to be?

Businesses exist for a reason. If I asked 100 owners why their company exists, the most common response would be to make a profit.   All companies sell widgets or services. Customers or clients pay the money a firm uses to pay the bills to keep the remainder as profit. When the purpose is profit, the problem is too. Solving the problem requires a product to be sold. Customers must pay more or buy more when a profit-driven business has a problem. The customer is now the product.

What might happen if profit was not the reason-to-be, but only an outcome to expect? A business built to solve a problem for consumers remains in business as long as they are a solution to the problem. And as long as your solving problems, you generate revenue. Your profit is not dependent on the consumer; it depends on how well you manage your income and expenses. If you exist to make a profit, you are out of business when you don’t make a profit. 

Ask The Most Important Question

The price of a widget or a service is the business of the business owner. Why the price is what it is, well, that’s your business. If you are the product necessary to be sold for the company to achieve their reason for being, you should know. It’s OK to be in business to make a profit, and it’s perfectly fine to be the product the business needs to meet its objective. Your only choice should not be to concede to be the product instead of the customer or client. When you discuss the WHY behind a firm’s reason to exist and the reason their fee or price is what it is, you’ll know if you are the customer/client or the product. All firms see you as one or the other. What do you want to be?

Our fee is $499 and 1.0%. We charge that to be sure you keep more of your money.

The reason you went into business selling services to customers was to make a profit. Elizabeth Wasserman, Editor Inc. Technology.   I respectfully disagree. tom meyer, essential real estate.

Making a profit is one possible outcome of being in business. Solving a problem that other people experience is the reason we started Essential Real Estate, LLC. The firm is profitable because it solves the problem of losing home equity on broker fees and negotiating flaws. The problem is simple: You pay real estate broker fees and selling concessions from your Home Equity. If your equity is $100,000 when you sell your home at full price, and $95,000 if you accept $5,000 less, and your broker charges a 6.0% commission on the sale price, a $400,000 sale will cost you 25% of your equity.   

Two Ways To Reduce Your Losses

Home sellers who don’t know more than their agent about how the real estate business work will lose money by making unnecessary concessions, believing myths, and giving away their negotiating strategy. Home sellers who have no choice but to pay the going rate will spend more than they might want on real estate commissions. The two ways to cut your expenses and keep more of your home equity dollars begins and ends with the ability of your agent and your agent’s reason for being. Homeowners ask real estate brokers, “What’s your commission?” They should ask the critical question, “Why is your commission X%?”

We Set Our Fee to Make Sure You Keep More of Your Money

I don’t know what fees each company charges. I also don’t know why anyone charges the fee they charge, but I assume the price was set to generate enough revenues to exceed expenses by enough to end the day with a profit for the owner. Maybe the cost of the service is set to match the level the market will bear. Perhaps it’s a combination of factors. From my 31 or so years of experience in real estate, I believe the market pretty much accepts a six percent broker commission to sell homes. From the same experience, I know firms set their revenue projections relative to the profit they intend to make. Before there is profit, expenses have to be covered, or costs reduced. We chose to limit our expenses by excluding wasteful spending on non-essential services and gimmicks. By doing this, our clients pay about 56% in fees. By being exceptionally good at structuring transactions to our clients’ favor, home sellers who hire Essential Real Estate make more money by avoiding traps and contract deficiencies. 

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%.