Have you walked through an open house and felt a surge of panic run through your body when the Agent holding the open house greeted you and asked you to sign in? You probably thought, “Why do I need to sign in, I just want to see the house” or “Oh great, now they’re going to start bugging me”. Whatever went through your mind, you may have felt like a deer in headlights for a split second while deciding what to do.
Many people have fears of working with a Realtor® and it’s likely due to the unknown answers to questions like:
Are they going to make me spend too much?
Are they going to waste my time?
Are they really going to listen to me?
Are they going to protect my best interests?
Am I going to get ripped off?
Throughout this five-part series, my goal is to put your mind at ease and provide answers to these questions so that you feel confident about hiring a professional Realtor® to assist you in the home buying or selling process.
Fear #1 – Are They Going to Make Me Spend Too Much?
As a buyer, think about who really has control over how much you spend? Is it the Realtor® or is it your credit score and income that determines how much you can really spend?
The best way for you to know “how much is too much” up front is to get pre-qualified. Details on how to go about doing this will be featured in a future post. In a nut shell, you should meet with a trusted bank or loan broker to go over your financial details to determine the price range that you should be looking in to find your dream home. They can work with you to determine what your maximum spend should be.
That being said, just because you qualify for a $400,000 loan, doesn’t mean you have purchase a home that will require a loan in that amount. That number will represent the very most that you can spend based on your current income, debt and down payment, provided the interest rates don’t go up. Your dream home may be listed at $350,000. Once you know what your number is, it’s up to you to let your Realtor® know the price range that you are comfortable with.
Believe me, it will be music your Realtor’s® ears to hear that you are already pre-qualified when you decide it’s time to get serious about finding your dream home.
As a seller, you are thinking about your “spend” in terms of how much it’s going to cost to sell your home. You see your profit disappearing in commission, closing costs, repairs, etc. Let’s be honest, until your home is actually sold and escrow is closed, the profit doesn’t even exist.
You may meet with several Realtor’s® and one may be offering a lower commission rate to sell your home and they may also be touting that they can sell it for a price that brings a big smile to your face. One of the most important questions you should ask yourself is “What is most important to me? Saving 1% (or 1.5% or whatever the number is) or selling my home?”
Here is why you need to think about this question. A proficient listing agent will do a detailed search of your neighborhood and know the price range that buyers are willing to pay for a home with the features, neighborhood and schools that yours offers. They will provide you with the facts of what is going on in your specific market so that you can decide on the best positioning of the sale of your home in that market.
Using the same numbers as above, lets say similar homes in your neighborhood are selling at (not listed at) $400,000. Some are a bit higher, some are a bit lower, but that number is generally what buyers are willing to pay. One Realtor® feels it’s appropriate to list your home at that price and for their services they require a 6% commission. Another tells you they can get $450,000 for your home and they’ll do it for 5%.
This is where that question about what is important to you comes in to play.
6% commission on $400,000 is $24,000
5% commission on $450,000 is $22,500
The difference between the two is $1500
Now $1500 is a lot of money, however, if you list your home at $450,000 in a market where buyers are only willing to pay $400,000 are you willing to have your home sit unsold for 3 or 4 months until you decided to lower your price to $400,000? Is it worth $1500 to you to sell your home for the going price months later? Or would you rather pay the $1500 and have your home sold right away because it’s priced right?
The bottom line is the difference in cost in these two scenarios is not very much in the grand scheme of things. The best thing you can do for yourself is choose a Realtor® that you feel is going to be honest and upfront with you, provide excellent communication along the way, and most importantly, get your home sold quickly by providing you with the information you need to position your house to sell so you can move on to what’s important to you.
Stay tuned for the remainder of this 5 part series. Better yet, sign up for emails and updates at the top of this page so you don’t miss what’s coming next!