Is Your Fee Negotiable? The answer to the next question is decisive.

“What;s your fee?” That’s the easy question to answer. “Have you ever charged less?” That’s the critical question home sellers must ask to know if the answer to the first question is sincered.

Real estate broker commissions are not all the same. Rates vary even among agents in the same firm. Even if the agent makes a convincing defense against a commission concession you can still negotiate a lower fee. Agents are confident in their answer to questions like “Is your fee negotiable?” It’s such a common question Google will give you about 127,000,000 connections about answering. It’s the next question that Google has no answer for. The truth is in the pause.

The topic of a recent company meeting at a local firm was the book Never Split the Difference. Negotiating is the skill the book aims at improving. Nothing of the strategy the author proposed came close to misrepresentation. Honesty. Trust. A sincere commitment to see the other person as deserving of your consideration are clearly part of the strategy presented. Here’s how well the book impressed this firm.

A dozen or so agents around the table, including the owners and leaders, were confident to the point of enthusiastic as they shared their prepared responses to the question, Is your fee negotiable? The quick quips were right out of 1970 sales training. “NO. Nope. Can’t do it. Company policy.” To a person, everyone knows there is no such company policy. Based on every agent’s past history any version of NO is not the truth. And yet the seasoned agents were proud of their answer and the unseasoned agents were impressed. I was not.

I asked this next question and their silence told me the answer I just heard was bullshit. The decisive question was simply, “Have you or your firm ever charged less?”

This conversation turned out to be a defining moment in my career. When deception is encouraged by the owners the culture is poisoned and the future is determined. Building something better is easier when the status quo can’t honestly answer a simple question about their fees. So I did.

There is no question, broker commission fees have not been reduced by the presence of the internet even though the buying habits and methods of consumers has changed substantially. Apparently the broker fee is immune to market pressures or the market pressures are to not pressures at all.

It’s not collusion that keeps fees as they are. I believe inflexible fees are the norm because real estate business owners are committed to doing today what worked in the past. Few leaders get to the top when most members want to be followers of leaders who are taking them right where they are and no where near their discomfort zone. The obvious choice in this environment is to be the change. As I see the world, it’s not important to be a leader. It is essential to see wrong and try to right it. Leadership is overrated. Look around. There are effective leaders behind every crime against humanity. The bigger challenge is to be a wise follower and a committed instrument of change.

I started looking at the broker fee problem from the point of view of the home owner. This is what I saw: The conversation about commission tends to be related to a percentage of the purchase price. It occurred to me that this focus on purchase price minimizes the problem and distracts attention from the real problem, which is, real estate fees are paid by the seller from their home equity, not from the purchase price. As a percentage of purchase price the cost is a single digit. As a percentage of the only real money in the transaction, the equity, this cost becomes a double digit problem. A typical American with $70,000 in home equity is probably going to pay 20, 30, 40, and even 50% of their equity in real estate commissions.

Go ahead, ask Essential Real Estate the questions you want to ask. “What’s your fee.” Answer. $499.00 at the time we sign the contract, plus one percent of the purchase price as our Success Fee at the time of closing. We suggest you offer at least another one percent to cooperating broker who procures the buyer. More than that is up to you. ”

Be sure to ask us the second question. Have you or your firm ever charged less? The answer is, Of course. Our clients set the fee they’re prepared to pay within the range of fees we’re offering.

When starting a business relationship on honesty and keeping more of your home equity in your hands is your thing call me. 608-332-8331.


Keep 33% More of Your Home Equity…for yourself. Essential Real Estate, LLC

Home equity is money you earned and saved. To accumulate equity in your home you made choices to sacrifice one thing or another. It’s money you invested in your home. That’s personal. You’re going to one day want these funds to use for another life experience such as buying another home, or settling an estate.

When access to home equity require you sell your home, sales fees and transaction costs will all be paid from your Gross Home Equity. If your equity is $100,000.00 and your expenses to sell are $20,000.00, you just paid 20% of your earned equity to other people. If you’re like typical Americans your equity might be closer to $50,000.00 and in that case 40% of your equity is destined to become other people’s money. Here’s a brief video to explain what we’er saying.

Paying 20% – 40% or more of your savings might be a wise choice, but if it’s not I believe you should have a choice to keep more of your savings in your hands. Anytime we pay more than necessary to receive less than expected there are consequences; having less than we could have is certainly one. We all face this problem when selling our homes.

To be part of the solution I designed and created Essential Real Estate, LLC intentionally to increase the amount of home equity that stays with you after the sale by at least 33%. Depending on fees charged by other firms that 33% could be $6,000.00, $8,000.00, $10,000.00 or more. Like you, I believe hard earned money should remain with the person who earned it.

Home equity is your money. You earned it. Essential Real Estate ensures you have a choice to keep more or your money. And we do this through fair fees, guarding your confidentiality, providing better negotiating alternatives, customized contract analysis and explanation, and clear transparency into the real estate transaction. Total compliance with Wisconsin Real Estate law is guaranteed.

If saving your equity is an advantage to you let’s talk. Email: Text or Call 608-332-8331.

The incredible shrink proof commission.

Real estate companies are fueled by real estate commissions. Those commissions are paid from other people’s money, specifically their home-equity. Where does that money go?

Texas Instruments calculators. If you had one in 1988 you were on the cutting edge of real estate technology. If you could operate it for anything more than multiplying a number by 7.0% you were likely trying to pre-qualify people. Eventually, you turned them over to a mortgage lender who knew how to use the machine.

Thirty years ago we booked air travel, rental cars, and hotels through a travel agent. We got our messages on pink paper notes, folded lengthwise and inserted into a lazy Susan-type message holder with slots for everyone. There they would remain until we returned to the office…which we did most every day.

The travel agents are real estate agents now, and they get their messages in an instant without needing to set foot in an office. Do we book our trips ourselves because the agents left, or did the agents leave because we book ourselves? Either way, when we miss our connection we have no one to blame but ourselves.

The end of this first decade of the 21st Century is near. This black electronic apple on my desk is a calculator, computer, cordless phone, radio, and television. Oh, yes. It’s also a movie production studio. I pay $100 a month for this gadget. And with it, I can spend more money and every store in the world is open 24/7.

Real estate commissions are no bargain. Despite the fact that the typical buyer spends three to six months researching and discovering the market without intentionally contacting a realtor, according to Zillow, the typical broker commission is 6.0% of the purchase price. How is it that a travel agent, who’s service was required far more often, is out of business while real estate agents are everywhere and their fee has gone down 14% while the average house price grew 108%. If you have the TI-68 please tell me if 6% of $383,000 is more money today than 7% of $135,000 adjusted for inflation.

Real estate companies are fueled by real estate commissions. Those commissions are paid from other people’s money, specifically their home-equity. I haven’t seen an ad for a house for sale in any media forever. Online sure. I’m a REALTOR and when I search for real estate outside of the home I use I like the Zestimate. Last time I looked, the cost of placing a property on Zillow and a thousand other websites is between zero and zero.

Where does the money go? Billions and billions of home equity dollars are paid as real estate commissions. Some of it is absolutely earned. Maybe someone could analyze the cash flow to see what is spent on essential service and what is misspent on the lifestyle enhancements of other people?

Essential real estate services are listed in Chapter 452 of the Wisconsin Statutes. Nothing in the law obligates the licensee to spend money on more than annual fees. Extravagant expenses are not required to be a highly-skilled, effective real estate agent.

Do you think a real estate company can be profitable and sustained by investing in delivering essential services and charging unselfish fees?

Fees, Costs, Expenses and Concessions are Paid 100% From Equity, Not from Sales Price

Real Estate sales fees are paid 100% from your equity; not from the sales price. Guard your equity.

Your equity is the bank account used to pay fees and costs to sell. As a percentage of your sale price the fee looks relatively small. The sales price is not where your expenses are paid from. That’s just a number used to calculate certain fees. The only real number is your GROSS EQUITY.

If your only fee was commission and the commission paid to a broker is 6.0% as Zillow suggests, and your Gross Equity is $150,000, your 6% is a nearly triple 16.0%. Here’s the thing, the commission is only one of the fees, expenses, and costs. The greatest threat to you equity is errors made in representation, flaws made in contracts, deficiencies in negotiations.

Instead of focusing on the asking price, or the sales price, keep your eye on your equity. Guard it. Make everyone who wants it earn it, like you did.

Pink or Green. Innovation or Valuable.

The lead generator turned you into a lead and sold you to someone who was intent on converting you. Another lead generator captured you too…and sold you as a lead. The conversion race was on.

An NPR interview this summer caught my attention. The guests asserted we call just about anything innovative. As an example they contrasted the launch of the iPod with the launch of iPhone 11. One changed the world of music, the other comes in pink and green.

Real estate is an industry boasting of cutting edge innovations, revolutionizing the way real estate is done in the world. And then a truck pulls up and guy pounds a stake in the ground, then attaches a post, and hangs a sign. The innovation in marketing? Our post is purple, your post is orange, your sign is vertical, their’s is a circle. Slow down all this advancement is making my head spin. Show me innovation.

The real estate license is a license to be involved in the legal process of exchanging ownership of real estate. The critical work we do depends on who you talk to. But everyone will agree, our role is to help people find property they want to own, and owners find buyers who want what they have and are willing to pay money for it. Matching ready, willing, and able people with ready, willing, able people who have what each other wants.

What innovation have you seen that does this matching? It’s not search programs. Those are filters. A house like this in this city, with this many bedrooms, for this price. That’s been done for at least ever. If there is a buyer for every property, real innovation will match the buyer to the house and the house to the buyer without having to wait for either of them to find the other. This could be done. If Bill Gate and Warren Buffet wanted this, Mark Zuckerberg would do it. If the real estate industry wanted this, it would not be done, but there would be some conversations.

Instead the innovation going on since at least 2004 is, get this, “lead generation”. Fifteen years ago Yahoo was the innovative company figuring out how to get name, phone numbers, and email addresses from people who clicked on house ads. The click was attached to a living breathing person at first. Then the lead generator turned that person into a lead, captured in, and sold it to the first person who wanted it. Then it was sold again. And again.

What happened to the person who clicked on that photo of the mid century modern home backing to a park-like setting? Somebody knows because somebody is keeping track. This person-lead was likely captured in multiple lead generating nets before someone “converted” them. Once converted, they became another statistic as one more tally in the conversion rate statistic. Put another notch in your lipstick belt Pat.

If turning people into leads and leads into statistics is innovation in the people business, well fine. If that’s as high as we want to aim go ahead. But I’m not participating.

The guests on the NPR show had another perspective. Because everything an anything is labeled innovation (and organic) the term is a cliche. Striving for this kind of innovation is a choice. Just the same, improving something existing to let it work better for more people in more places, for less cost, and less danger might not be innovation, but it’s valuable. In real estate, turning ideas into reality that produces outcomes to better suit the buyer and sellers, while improving the experience and reducing risk is valuable. And possible. If we only knew what home buyer and home sellers want. Hmmm. What is it they want. We ask and they tell us. But we don’t listen. What they want is not what we want so we turn back to the lead generator, throw out larger nets and try harder to convert you into a number. It’s a big world. Someone is listening and thinking and hearing the people…they want something green. And crisp. They will get it little by little, but the rest of the industry will paint your number pink. Or purple. Innovation.

Radon Testing. What’s The Intent of The Contingency?

The EPA says: Radon is a health hazard with a simple solution. I say install a mitigation system and know the level is guaranteed acceptable year around.

Radon is a health hazard with a simple solution. (EPA.Gov)

It’s safe to say 100% of the radon tests set in homes in Wisconsin will record a positive radon level. It’s also safe to say, 100% of the radon tests conducted as a contingency to a residential real estate transaction will test positive for radon. There is no dispute that radon is a contributing factor to lung cancer. There is no dispute that protecting yourself from exposure to radon gas is the smart, prudent, and healthy choice. No one should minimize the fact that scientific studies prove radon is a health risk.

With that said, I believe 100% of homes should have an effective radon mitigation system installed at the time of construction. Existing homes can be, and are routinely, retrofitted with mitigation systems. The cost of the mitigation system is inconsequential considering the risk and relative to the cost of the home. According the the EPA, even atypical high levels can be reduced to acceptable levels.

Radon testing contingencies have become common in Wisconsin real estate transactions. In 1992 when mitigation companies came into the market a mitigation system of PVC pipe, a small motor driven fan, an electrical outlet, silicone calking of hairline cracks, and some labor to drill a hole into the basement concrete floor carried a cost of over three thousand dollars. Today, we have an abundance of qualified mitigation installers using essentially the same products (without the silicone caulk), and including a follow up test showing the radon level is below the EPA action level for a cost of under One thousand dollars.

The $150 cost of the initial test to tell you you have radon gas is 10% of the probable cost to cure. That in itself is enough to consider saving the $150 and just go to mitigation. But I think there is something more important to think about; the cost of doing nothing. A two day test will give you an average hourly radon level for 48 consecutive hours. Accepting a low radon level reading as an indicator of radon levels over the course of 12 months, four seasons, and a variety of atmospheric pressure situations is a gamble not worth taking.

To be clear, I am not saying the 48 hour test showing a radon level above the EPA action level is not enough information to decide the radon level is unsafe. In fact, I’m saying the opposite. A safe approach is to assume the level is going to be high enough to be a health risk, save the $150 test cost, hire a professional to install a mitigation system to your standards, and have the peace of mind to know your radon level is below the EPA action level, and the system is guaranteed by the installer.

The new Wisconsin WB-11 Residential Offer to Purchase includes a radon testing contingency. Contingencies included in the Offer document quickly become “standard” inclusions. Previously the contingency was included in addenda created by real estate firms and if the addenda was not included in the Offer, it was likely the testing contingency did not get written into the Offer. Good news for radon testing firms. Given a choice buyers will elect to include the Radon Test in their Offer the way most of us select food for our plate from a buffet—if it looks good we’ll take it.

Before including a radon test in your client’s Offer, make sure the client understands the system cost factors and the uncertainty the contingency adds for the seller. Radon is a high risk health hazard. Testing will show radon gas in the house. A low reading is not an indicator that the level is low on average over the course of a year. A safe assumption is the level will rise and fall with the average being more than the EPA action level. A check with a mitigation company will confirm what the EPA tells us–even a high level can be reduced to an acceptable level. The cost is not prohibitive.

With all of the above true, the real reason a radon test contingency is added to the Offer is to give the buyer a chance to force the seller to pay the cost of installing a mitigation system. There are alternatives. A credit (equal to the estimated cost of a mitigation system and followup test) could be included in the Offer with the funds designated for closing cost credits.

Falling into the trap of checking this box to include this test because it’s there and because radon is a health risk will place your client at a disadvantage. The agent who is able to have a logical conversation with a client will allow the client the opportunity to make an informed decision and an opportunity to make a more appealing Offer to the seller….or not. Their choice. Assuming sellers won’t care if the Offer includes a radon testing contingency is something agents will do to the detriment of their client. In those situations, their assumption is your advantage. Sometimes the way to outbid the competition is to out think them. And we all can think.

New WB-11 Residential Offer to Purchase: Changes

More of the answers owners typically want to know are right where they should be–on the first page. Price, Binding Acceptance, and Closing date. The definition of a fixture is front and center on page 1, with some clarification tweaks.

An Offer to purchase is as simple as a written form of a conversation a Buyer may have with a Seller. It makes sense the the Offer document would flow from beginning to end the way the conversation would begin and end. Buyer: “I’ll buy your property for this amount, on this day.” Seller: “OK”.

The new WB-11 isn’t that simple, but it is formatted closer to the natural conversation. Highlights:

More of the answers owners typically want to know are right where they should be–on the first page. Price, Binding Acceptance, and Closing date. The definition of a fixture is front and center on page 1, with some clarification tweaks.

Page 2 has long been boiler plate with definitions and explanations. Now it’s a working page where Earnest Money and the rules of Earnest Money disbursement are together.

Page 3 Conditions Affecting the Property use the entire page. The list should be a closer match to the Condition Report items.

Page 4 now has only the Inspection Contingency and the definition of Inspections and Testing. By itemizing the 3 steps a buyer is authorized to take to inspect it’s expected the process of inspection will be better understood. Seller’s right to cure is unchanged.

Page 5 A radon testing contingency is part of the Offer for the first time ever. Good news for the testing and remediation business, not so good for buyers who will have that contingency included without understanding the three day test is unreliable for determining long term exposure, and the fix is almost the same price as the cure. Buyer agents may want to sharpen their Radon issue knowledge before they fall into the habit of checking the test contingency out of habit and costing their client an accepted offer.

Financing Commitment Contingency As long as we can remember, there has been no Contingency to Obtain Financing in any version of the WB-11. By labeling the contingency what it is, a contingency to be able to obtain a financing commitment, if a buyer wants the Offer to be contingent upon getting the money, they will know they have to create that contingency.

The satisfaction of the Commitment Contingency is modified to allow buyer signed commitment letters to be used to satisfy the contingency OR a Buyer’s written direction to deliver. However, a commitment sent by the lender does not satisfy this contingency. Essentially, this change reverts the practice back to pre 2011 and in line with the changes firms incorporated in the Addenda to allow deliverance to be done without a Notice from Buyer.

Default days and amounts have been added to fix the issues that come with leaving blank lines unfilled.

Page 6 Seller Financing: Wisconsin has a unique provision which made 100% of the Offers subject to a Seller’s right to provide financing if the financing as described was unavailable. This is now an optional condition of the Offer.

Non contingent on Financing Offers are not “cash offers”. The revised condition for the Buyer to provide evidence of funds available allows the buyer to provide verification that funds are available at the time of verification, or some other documentation. This change was driven by a need for buyers to bargain for the ability to make a non financing contingent offer when the funds are not available today, but will be available in the future when the sale of their real estate occurs.

Closing of Buyer’s Property Contingency: The forms committees worked to make this provision’s steps easier to understand and to tighten the Buyer’s ability to waive the contingency. A few options for proof of buyer’s ability to close are provided and the term “Bump Clause” is used to head the steps Buyer and Seller will follow once Seller accepts a secondary offer.

Page 7 There must have been a flood of confusion about who pays home owner association one time fees at time of closing. Why this condition was necessary is a mystery. Association fees have always been seller’s responsibility. I’m not sure why this one time fee is treated differently. Buyer’s who agree to pay this will want to know the fee in advance.

Page 8 Special Assessments/Other Expenses: Have you ever wondered what the term “Levied” meant? Wonder no more, it’s defined now.

What happens if an optional provision is completed but the box is not checked? Well, according to page 8, the provision is not part of the Offer unless the box is checked.

Page 9- 10 Foreign Investment in Real Property Tax Act (FIRPTA): Who knew a buyer is responsible for paying up to 15% of the purchase price to the IRS when purchasing a property from a “Foreign Person”. Page 9 not only includes a WARNING, the WARNING includes a provision to allow the Buyer to terminate the Offer, or withhold the 15% if Seller fails to deliver certification of Seller’s Non-foreign status NO LATER THAN 15 DAYS PRIOR TO CLOSING. Special care is needed to make sure this exit clause is closed on 100% of the transactions we are part of.

Page 10 Additional Provisions: We have a total of six lines to include additional provisions and those six lines are all on page 10.

Optional use date is November 1, 2019. Mandatory use date is January 1, 2020. I can’t think of any good reason to continue to use the old WB-11 after November 1.