Very informative article as a first time home buyer from Real Estate Rebate and Commssion Refund networking site at rebagents.com/blog.
We spend our time online at various discount and frugal spending sites like www.rebagents.com, lessthan6percent.com, slickdeals.net, fatwallet.com and others. We reached out to one of our favorite sites and he thought his readers would benefit from our breakdown of the current real estate transaction process. When someone is in the market to buy, their first instinct is to reach out to a real estate agent, when in actuality, it should be the last thing on your checklist. A more detailed task list will be provided below, but the first thing you should do is get educated on the process and decide what will work best given your current situation. If you’re the type that will let an extraneous third party with no skin in the game, yet all the upside, determine where to park your hefty down payment and potentially raise your family, this article is not for you.
Why finding a real estate agent should be the last item on your task list.
- The first step is to gather your financials and reach out to a direct lender (credit union, bank, mortgage broker, etc) to get a firm, realistic grasp on what you can afford. This will set the upper limit of your price spectrum.
- Research and identify properties online via the MLS directly or via platforms like Trulia.com, Redfin.com, or Zillow.com as they all pull data from your local MLS. There will be a bazillion (give or take) Realtors wanting to help you with your search, but just focus on the properties themselves and the data
- Attend publicized open houses and “brokers’ opens” which are basically just an additional an open house either before or after the weekend open. Get an idea of what you like in terms of style, location, size and price as nobody knows this better than yourself.
- *Always disclose that you are working with a Realtor/Real Estate agent when engaging with any other agent, even if you have not decided upon one* This is to protect you from being represented by an agent who happens to be at the property in a dual agency and protect any commission rebate savings.
- Now that you have your finances squared away, have received a lender pre-approval and have a good sense of the areas and types of properties you’re interested in, you’re now in a very strong position to maximize your commission rebate incentives from a prospective Realtor. Buyers often overlook the additional closings costs and fees associated with purchasing and these amounts can definitely add up.
Let’s take a breather, but have you noticed you haven’t yet needed a Real Estate Agent as of yet?
That’s because you’re fully capable of accessing the abundance of data online your own. By taking the time to determine your own likes and dislikes, you’ve also effectively saved your future Real Estate agent a great deal of time/resources which will be of great important later when you’re ready to actually put in an offer. Let’s continue.
Real Estate Agent Commissions and Your Rebate
In a traditional sales listing, a seller will enlist the help of a Real Estate agent to help market and ultimately sell their home. The seller will also offer a 2.5% commission to the selling agent (or a buyer’s agent who procures a buyer). The table below illustrates how much a real estate agent representing a buyer stands to make at each price point.
|Purchase Price||%||Agent Commission||Your Rebate Amount|
Your goal as a buyer is to maximize the “?” in the table above and you’ll be in the best position to do so by minimizing the time/resources expended by a Realtor up until the time of offer submission. For example, a Realtor will be more likely to issue a greater commission rebate, if you’ve already identified the property and all the Realtor has to do is prepare the offer (which should all be done electronically via email).
Realtors want to maximize their ROI and by allowing them to focus only on the purchase transaction (eliminating lead generation, prospecting and time consuming showings), they will be more likely to offer such an incentive as opposed to a Realtor who has spent time driving clients around, combing through properties that clients may or may not like, etc.
How do I choose between the various “discount or rebating” Realtors?
The are very few barriers to entry to becoming a real estate agent and thus there is an abundance of Realtors trying to capture the market. Many have opted for the discount model, outwardly advertising commission rebates and representing buyers for just 1%. Keep in mind that this practice has been around for quite some time, but just has not been as proactively marketed. The name of the game is volume and in order for a discount agent to survive, they need to ramp up transactions and closings. Be also wary of a number of rebate or discount firms who advertise representation for just 1%, but actually have minimum commissions that they need to make.
For example, one firm will advertise that they will do a deal for just 1% of the purchase price, effectively advertising a rebate of 1.5% of the purchase price (based on a 2.5% commission – varies). However, in their fine print, it will show that their firm needs to make a minimum $5000 commission. On a $250,000 property ($6,250 potential commission), that only yields a rebate of $1,250 instead of the immediately enticing $3,750 when factoring in that $5000 minimum.
Remember, everything in Real Estate is negotiable, including commissions and rebate amounts
Most consumers don’t know this and they adhere to the “customary” figures. No, it’s your money and your buying power. You hold the leverage and can dictate the terms because there will be another real estate agent in line in case you can’t come to terms. By thinking of this as a “transaction,” you’ll have a better gauge of value maximization.
To conclude, our position is not that real estate agents offer little value in a transaction. Many agents will argue that they offer exceptional customer service and tremendous expertise. Our premise is that as a consumer who has done the majority of the leg work and simply needs a transacting party to handle from there, why wouldn’t you want to be rewarded in some form, especially if you have eliminated the most time consuming aspects of a “real estate transaction.”
That’s all for now and hope that offered some insight. Have any questions? Send us a note as we’d be happy to hear from you. We also love hearing about how much of a rebate you were able to receive.