With the Olympics now over, I thought this week I’d share how to get your home to the finish line! Of course, you’ve got to get through the quarterfinals (escrow), the semifinals (contingency removals) to make it to the finals … closing. While this process was always straightforward (at least from the client’s perspective – the agent handles those complexities for you), there are recent changes to the transactional process that do impact HOW to get your home across the finish line and ensure a successful closing.
I’m already getting calls from agents asking, “Is your seller offering concessions on this?” And then, they want to know how much. (“Concessions” is the new word for compensation.) To their question I say, “It depends on the offer.”
Before we launch into some analysis about what I call “the new norm,” let’s recap what concessions actually are: Concessions can be payment to the agent or a credit to the buyer’s closing cost. They don’t necessarily have to be a percentage. They can be a flat fee. The definition is wide open and can be any combination of concessions to the agent. One of the sources of concessions would be provided by seller, the buyer or a combination of the two and it can not just the payment to agent; it can also go toward the buyer’s closing cost or any combination thereof.
Most of my sellers are fine paying the standard buyer’s agent commission as long as it is a mutually agreeable price for the home. If a buyer comes in with a low price, they may not be as amenable to that. This new transactional process puts a lot more emphasis on the buyer’s agent, who must get their concessions in writing before the home search begins.
In this “new rules of real estate” world, concessions are not just a negotiating point but also something agents have to work through during the course of the transaction. A listing agent must work closely with a buyer’s agent as a team because everyone wants to do a great job for their clients but we would also love to get paid for our hard-earned services, skills, support and expertise. We should be fairly compensated for what we are worth, not what people may think we are worth.
This reality is going to encourage agents to get realistic with offers and counsel clients that if they want this house, they’re going to have to pay a fair price that’s acceptable to the seller. In this scenario, everyone triumphantly crosses the finish line together.
The misconception is that the “new rules of real estate” will help prices to go down, and that is absolutely not going to be the case. If there’s any money to be saved, you can be sure sellers will save it for themselves. They aren’t giving that back to the buyer. Commissions have historically always been built into the listing price because the seller has always paid them, and just because there’s a change in the process doesn’t mean the buyer is going to automatically switch to paying these fees. A majority of buyers today don’t have the funds for a downpayment, the closing cost and then extra money to pay the concessions too. The only way a buyer is going to willingly pay is if they’ll potentially lose the house or it’s such a good deal that it makes sense to pay some or all of the concessions to secure the home.
Real estate’s new rules might also give sellers the false impression they don’t need to pay concessions … but they never had to pay them, even under the previous process. However, if a seller wants to sell their house I’d say this: Without exception every seller I’ve dealt with is willing to pay concessions because they want their home to sell for the highest price in the most reasonable amount of time, and that’s the way you make it happen. A majority of sellers are incredibly savvy and understand how to expedite a successful sale for everyone.
A savvy buyer is going to recognize the immense value of a buyer’s agent as well as the indisputable need for a buyer’s agent. Without a good buyer’s agent forever by your side, a buyer could be missing out on major issues during the inspection process, they might not receive expert loan advice and ultimately, the decision could cost the buyer thousands of dollars over the term of the loan. You could also be walking into a legal quagmire if you are unrepresented as a buyer or use an inexperienced buyer’s agent willing to work for little to nothing. The concessions will end up seeming cheap compared to the kind of money that can be lost if a buyer isn’t advised by a good buyer’s agent! It’s short-sighted to think a buyer would want to save money up front when they can lose big-time in the long run.
If you’d like a refresher about why you need a buyer’s agent, here’s an article I wrote a few weeks ago that lists some examples of what a good buyer’s agent will always do for their clients … and once you read this list, it becomes obvious why they should be fairly compensated for those services.
So, what’s the bottom line? If you want to successfully get your home to the finish line or successfully cross the finish line into homeownership, make sure you have an experienced and knowledgeable real estate professional by your side, someone who can carry the torch and help ensure a successful closing … or closing ceremony!
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Andrew Manning • REALTOR® • Berkshire Hathaway HomeServices California Properties • DRE: 00941825 • 818-380-2147 • andrew@andrewmanning.com