Tag Archives: home equity

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. 

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.

Essential Real Estate. A Free Market Choice by the Numbers.

For a market to be free there must be a choice on both sides of the transaction. Do we have a free market real estate service economy?
Maybe.

Real estate representation is a licensed service. The standard of performance is the same for every real estate licensee. There is no choice as to which legal obligations a licensee will perform. There is a minimum standard though, and we expect some licensees to rise above the minimum to be a choice of higher-skilled service for the consumer.

What about the price? As long as the consumer is willing to pay *6.0% broker fees the market will be dominated by firms that choose to offer the same real estate licensed service for the same 6.0% price. Eventually either the consumer will demand a range of prices for the legally obligated services or licensees will choose to structure their business model to be profitable and sustainable at an alternative fee.

Essential Real Estate, LLC was created in 2019 in Madison to be a free market choice for home sellers who want to keep more of their home equity by spending less on broker fees. These are the numbers.

When the fee of choice tends to be 6.0% of the sale price the regressive nature of the “tax on value” hits those who can least afford the fee the hardest.

$400,000 Value. $300,000 mortgage. $100,000 equity
$400,000 x 6.0% = $24,000.
$24,000 is 24% of the equity.

OR

$400,000 x 4% = $16,000
$16,000 is 16% of equity.

To pay a 6.0% commission the home seller will pay 50% more money compared to a 4.0% commission.

50% more, in this scenario, is $8,000. By moving that $8,000 back into the hands of the seller the difference is impressive:

The $8,000 is a 33.3% reduction in the price of the commission.
The $8,000 is a 10.5% increase in retained equity.
The $8,000 applied to the next down payment will reduce a monthly payment on a 30-year mortgage at 4.1% by $39.
$39 per month is $468 per year
$468 per year for 30 years is $14,040.00

Finally, home owners have a choice to pay less in selling commission and keep more of their home equity. Essential Real Estate has set the market free.

Listing fee: $499 at signing. Commission of 4.0% or less due at closing. We will show you how to make that 4.0% less.

* The Internet Didn’t Shrink the 6.0% commission

Essential Real Estate v. Anybody: Compare Your Equity Savings Here

Let’s keep it simple. In 1963 residential real estate commissions were typically 7.0% of the purchase price. Today, Zillow says they’re about 6.0%.

Commission down 14%. Zillow says the Median Home Value is up to $285,000. Census.gov shows the median value was $17,000. Is it possible the broker fee was about $1,200 in the summer of ’63? It’s $17,100 today.

We pay 100% of our broker fees from our Home Equity. Home Equity is savings earned. If the median home seller has a typical home equity of $50,000, broker commission is going to consume 34.0% of their equity.

And that’s just the cost of fees. We haven’t looked at the costs of under representation and negotiating flaws.

Essential Real Estate is created with an aim to increase your home equity savings by 33%. They surpass that with real estate contract law knowledge and skills.

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

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.