realtor commissions

realtor commissions tend to confuse even realtors so... i thought i would explain how they work.

a lot of people aren't aware of how they get calculated or distributed. here's how it works when you get a realtor to list your home and put it on the market. we'll use a flat 6% in this example.

• realtor x (your listing agent - they represent only you) charges you 6% on the sale price of the home
• realtor y (the buyer's agent - they represent only the buyer) brings a buyer who offers you $120,000
• you accept this offer
• realtors x and y finalize all the contract paperwork
• realtor x (your realtor) will probably walk away with 3.5% ($120,000*.035 = $4200)
  
• realtor y (buyer's realtor) will then walk away with 2.5% ($120,000*.025 = $3000)

(why does realtor y get less here? because sometimes the list agent doesn't feel like giving an equal split. but sometimes they do. it's their decision. and by all means, realtor y could write 3% into the contract and realtor x might agree to it. everything is negotiable...)

the 6% on $120,000 works out to be $7200. realtors x and y will split this somehow. so far so good? good. because here's where it gets tricky. realtors usually work for a "broker". coldwell banker, remax, prudential - these are all real estate brokers and they charge their agents a specified percentage of each commission. it's different for every realtor. here's how it might work:

• realtor x works for coldwell banker realty
• realtor y works for remax realty
• realtor x is under an agreement with coldwell banker to share 35% of each commission with them
• realtor y is under an agreement with remax to share 30% of each commission with them
• realtor x walks away with this much: $4200*.65 = $2730 (coldwell gets $1470 just for being the broker)
  
• realtor y walks away with this much: $3000*.70 = $2100 (remax gets $900 just for being the broker)
  

and that's the story in a nutshell. two realtors and two brokers will get paid with $7200 in proceeds from the sale of your house. and as you can see, it's good to be the broker.

p.s. - realtors work on 100% commission. if they don't help someone buy or sell, they don't get paid at all.

open houses

i'd like to say a few words on the best practices for open houses. this information is targeted at the homeowners who must clean and straighten before prospective buyers walk through. i hold homes open every week and every week i see similar problems and hear similar complaints. so here's the deal on what to do.

take the trash out. i was just in an open where the sellers left trash in the kitchen and it reeked of old broccoli and strong spices. not good. people walked in the door and it was the first thing that smacked them in the face - a bold, stuffy odor. i cannot stress enough how important it is that your home smell fresh.

clear the sink of dirty dishes. if you have a dishwasher, hide them in there. come to think of it, hide whatever you can in there.

• same goes for dirty clothes - throw them in the dryer if you can.
• same goes for toys. have some storage bins or laundry baskets ready for them and then then throw them in your trunk when you, the kids, and the dog head out for ice-cream that day...

remove all random papers. we've all got them lining counter tops and desks. put them in a drawer or under the bed until later that day. besides, you don't want total strangers seeing your personal business anyway.

take the dog. dogs should go away with you during this time. cats can stay. try to contain them to one room if you can.

open some windows. depending on the weather, open the windows for a bit before it's go time. fresh air is the best air. (refer back to the first item.)

open blinds and curtains. let all possible daylight stream in for the afternoon.

put out fresh bathroom towels. no, people walking through won't be using them, but they certainly do make a big difference in your bathroom's appearance. and while you're at it, close the toilet seat lids and empty the trash in there as well.

play background music. you know, something light. something 80s. maybe tune into whatever local sporting event is going on. just do something.

bake something. i know, i know. where will you find the time after completing all of the above. it's just a nice to have when the aroma of fresh baked cookies or pie is wafting through the house.

• i don't recommend lit candles in lieu of baked goods. there are horror stories of homes that have caught fire during the open house because of this specific scenario. no one wants that.
  

your goal in all this is "staging". you want to ensure your home looks and smells like it fell out a pottery barn/martha stewart catalog magazine. and you can easily do it if you just go back to the basics by cleaning and straightening your living quarters.

define buyers market...

so what does 'buyers market' mean... it means there's an oversupply of "inventory" (or homes for sale). the way we figure this out is by calculating the absorption rate.

here's a great description:

"The Absorption Rate is the ability of the real estate market to absorb or sell all of the houses for sale in a given amount of time. For example, if 100 homes are sold every month and there are 1200 homes for sale, it will take 12 months to sell all of the homes currently for sale. If there are 2400 homes for sale, the absorption rate will be 24 months or 2 years for all of the homes to sell, this does not take into count the number of houses which will eventually come on the market in addition to those already for sale.

If you would like to sell in 12 months, you need to take the absorption rate into account. In the above scenario with 2400 homes for sale, we know that only 1/2 of them will sell in the next 12 months. If you need to sell within the next 12 months you need to price the property in the lower 50% of the price range for similar properties in order for it to sell in the next 12 months. To sell in the next 6 months it would have to be priced in the lower 25% of the competition."

also check out this article from realtor.org:
http://www.realtor.org/RMODaily.nsf/pages/News2007111404?OpenDocument

if you're in ohio in the cleveland area, i'd be happy to calculate this number for your specific neighborhood.