Net Equity, Not The Purchase Price, Is The Prize.

We think of the residential real estate sale as a price transaction when, in fact, it’s a trade of NET EQUITY. Price and expenses are factors in the formula to calculate a home seller’s home equity. PRICE – EXPENSES = EQUITY. By keeping eyes on equity, real estate agents have many more options to craft Offers sellers are likely to accept. 

¬†Selling our homes is how we release our home equity to do the next thing. By focusing on NET EQUITY, not price, we avoid the consequences of agreeing to expenses that deplete our equity and terms that leave negotiations open. By structuring our Offers to reduce the owner’s costs to sell, we increase their NET EQUITY and improve our chances of getting our offer accepted. The price is only a participation trophy. The actual money and the security of a sure thing is the real prize.¬†

Price is misleading

Homebuyers who only know how to improve an offer by increasing the price will pay a premium in negotiations. The buyers who provide the seller with secure terms and a reasonable price receive accepted offers and probably retain some unspent equity by not overpaying. To pay a reasonable price without being the highest price offer on the table, increase the Seller’s Net Equity after the sale by decreasing the Seller’s costs to sell.

The Secret Is Knowing Where The Money Is In The Purchase Agreement

You’ll find those opportunities to improve your offer without increasing the price throughout the Offer. There are at least two places on the first page of the WB Purchase Agreement, and at least six more throughout the 10-page offer.

At Essential Real Estate, we know how to make the Offer work for our buyer clients, when the goal is to be the most attractive buyer. The same strategy works to give our seller clients every opportunity to eliminate risk and increase the amount of the equity check they’ll receive at closing.

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?

Merrian-Webster changed their definition of racism

We can’t talk about the American experience of prosperity in the decades after World War II, without recognizing the prosperous impact of homeownership. And to that, we are wise to acknowledge segregation eliminated the opportunity for black Americans to prosper as the white Americans who were not living next door. The mood is right in the world today to raise our understanding of the eternal consequences of our actions.    Merriam-Webster (the dictionary people) just took a giant step in changing racism’s discourse by modifying their definition of racism to include systemic oppression. When an institution is trusted, respected, and looked to as reference turns how they define racism into thorough recognition of consequences, we are on our way to a more excellent dialogue.  

The strength of definitions is their inflexibility. No one benefits from words meaning one thing under one administration and another under the next. Over time everything we believe is put to the test in the streets, in the classroom, and courts. The concept of racism was more or less understood and accepted in 1968 to be this but not that. It’s natural that given any boundaries, humans will work around the edges to push the limits and breach the walls until the definition of a word is no longer suitable because now what is openly racist is shaded by slight nuances. 

Examples of Begging Love Letters to Home Sellers

Twice in my career, love letters to home sellers became the go-to idea Realtors turned to as a way to give some of their buyer clients an edge in competitive markets. Today we are seeing home sellers request letters be included with Offers to help the seller select the people who will be the right fit for the neighborhood. Some people need to know more than how favorable the price and terms to show a person’s commitment to getting safely to closing. And if that need to know includes what they believe (Christmas=Christian, Family=male dad, female mom, at least one child, and a pet, higher education=better fit, etc.), the decision to negotiate has everything to do with discriminatory factors.   

The intent may not be crystal clear.

Every person who wrote a letter to appeal to the sensitivity of a home seller did not intend to violate Fair Housing laws. Every Realtor who encouraged and helped clients write letters, or helped home sellers select the lucky buyer based on the buyer’s messages and photos is not racist. But every note and every chosen picture included for the seller to consider has an intent. And it is that intent a licensee may get the opportunity to prove or defend when they facilitate a decision to negotiate with this buyer but not that buyer on factors that are unfavorable to a protected class. 

It’s Not Always Easy to See

A Google search took me to this page of Dear Seller Letters. I’m not going to say what I think is easy to see. Read the letters and decide for yourself if the letters play into the systemically oppressive attitudes that have forever kept black and other minority Americans from owning homes they are well qualified, prepared, and committed to owning. 

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.

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.

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Learning v Training

Congratulations to the nine Realtor learners. You’re in the top of your company because you did the work to learn. Keep growing.

How does one become a top real estate agent? Let me count the ways. One, two, three, Two Hundred and ninety eight million. In .71 seconds Google found 298,000,000 results pertaining to my question. In .47 seconds Google gave me 366,000,000 results for real estate training. Certainly there appears to be interest in. (1.86 million results for train me to be a top real estate agent.)

I just saw a social media post recognizing the top real estate agents in an established local firm. Of the 60 agents who achieved the recognition level nine began their careers since the Great Recession. They did it without training. They committed to learning, and did the work. Going from zero to multiple millions is the carrot real estate trainers dangle, and who wouldn’t want that? As long as it’s fast, and easy, there will always be a rush to pay the fee, to be trained to be a star. We won’t see 15% of them in the top performer list of their firms. Rather than a quick road to success, the training programs launch most of their customers on a short career.

That’s not the same for learners. Learners like the nine I mentioned are in a hurry to be effective. They are in a hurry to do things right. They want to learn. They don’t have an interest in being trained. What’s the difference? Training is remembering which boxes to check and which lines to fill in. Training is the passing along of memorized scripts. Learning is knowing how to interpret and explain contract terms. Learning is knowing why the contract has this or that provision and knowing implications of those provisions. Not just well enough to draft an Offer, but well enough to also explain the document in terms their client can comprehend.

Congratulations to you all. I remember you when you didn’t know anything. You learned well. Keep growing. Keep sharing what you learn. Enjoy your careers. You learned it.