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Buying

The Power of The Rebate

Believe it or not we have seen a resurgence in situations where multiple buyers are bidding simultaneously on the same home. In these situations buyers need to find a competitive edge when trying to outbid other buyers. There is no more powerful tool in gaining that advantage than "The Rebate".

Here is an example to illustrate the power of The Rebate in these situations:

Home is listed for $275,000 and the seller is offering buyer agents a 3% commission. Buyer X is utilizing the services of an agent that DOES NOT rebate a portion of their commission to the buyer. Buyer Y is utilizing the services of an agent that DOES rebate a portion of their commission to the buyer.

Buyer X offers $275,000 for the home. Buyer Y offers $277,000 for the home. Buyer Y wins the bid.

More importantly because Buyer Y's agent rebates more than $4,000 to Buyer Y, the net purchase price of Buyer Y's offer is less than $273,000.

Not only did Buyer Y win the bid but it did not cost Buyer Y anything relative to what Buyer X was offering.

A rebate is a powerful tool in all buying scenarios but particularly in multiple bid situations.

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            Brief History on Rebating

            In the world of homebuying the term "Rebating" refers to the practice of a real estate brokerage firm returning or refunding a portion of its commission from the seller or seller's agent to their buyer client.

            For many years the large and dominant real estate brokerage firms with the help of the National Association of Realtors fought for rules prohibiting the practice of Rebating. These firms and NAR were very successful for many years. That was until their actions caught the attention of the Department of Justice Antitrust Division.

            In 2005 the Department of Justice announced it had launched an investigation into two rulings by the South Dakota Real Estate Commission prohibiting brokerage firms from Rebating in South Dakota. Shortly after it began its investigation, the Department of Justice announced that the South Dakota Real Estate Commission had rescinded its rulings and that Rebating was now allowed in South Dakota. Thereafter the Department of Justice began investigating bans on Rebating in other states, resulting in several more states lifting their bans on Rebating.

            Now that the legal framework is set allowing more competition in the real estate industry, we hope that more firms like ours take advantage of that framework to provide consumers more choice when it comes to buying a home. Thank you.

            For more on the Department of Justice's efforts visit their page on Rebating: http://www.justice.gov/atr/public/real_estate/rebates.html

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                      Bargain Shopping

                      It seems like with every new Holiday Season American consumers are demanding more and more value from retailers. In our technological age shoppers have become ultra savvy when it comes to value and price. No longer are consumers fooled into simply assuming that the most expensive item is the highest quality item. Consumers instinctively understand that value is more important than price and that with just a little extra research they can usually find a high quality item at a better value than the highest price one.

                      The question then for me is why has the American consumer not been more discerning when shopping for a real estate agent or firm? With a little extra research the consumer would realize that the highest price agents and firms are not necessarily the highest quality and that there are far better values available than the highest priced firms and agents.

                      Thanks to advancements in technology and overall efficiency, real estate agents can now provide the same if not higher quality services at a fraction of the cost. Why then have the prices for services not changed for the vast majority of providers over the past 30 plus years?

                      When the precursor to today's modern cellphone was introduced in the 1980's the original model cost $4,000 per phone. Can you imagine if you walked into Best Buy today and saw a cellphone listed for $4,000? Let's see do I buy an Iphone for $300 or the $4,000 phone that takes 10 hours to charge for 30 minutes of talk time? That would be a "no brainer".

                      If consumers were complacent the quality and value of goods in America would never improve. Thanks to American consumer demands the quality of almost every product has improved over time and the value of those products has increased immensely. If consumers start demanding better value and quality out of real estate agents and firms things will change. However, until consumers start flexing their purchasing power, the value provided by most firms will remain poor.

                      We encourage you to demand better value out of today's real estate industry. Thank you.

                      Buyers Get a Competitive Edge With Flat Fee

                      Because Flat fee shares its commission with its buyer clients, our buyers have a competitive edge when bidding on houses. Here is an example:

                      A home is listed by a firm and the seller is offering buyer agents a 3% commission. The home is listed for $350,000.

                      A buyer with an agent that does not share their commission offers $325,000 for the home.

                      A buyer client of Flat Fee offers $330,000 for the same home.

                      In almost every case, the seller is going to accept the higher offer of $330,000.

                      At closing Flat Fee receives a commission check for $9,900. Flat Fee keeps $3,500 and gives the rest, $6,400, to our client.

                      Thus, even though our client offered $5,000 more for the house, they actually paid $1,400 less than the other buyer was offering for the house.

                      As you can see buyers gain a competitive edge by using Flat Fee.

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                          Not Too Cold to Start Looking

                          With bone chilling temperatures outside it may be difficult to think about Spring and Summer. However, because purchasing a home is typically the largest financial investment an individual or family will make in a year, it is important to begin planning well ahead of the time you actually want to buy. For most families the preferred buying season is in the Spring or Summer in hopes of making the physical move prior to the upcoming school year.

                          Although historically there is greater inventory in the Spring and Summer, there are new homes listed every day in Vermont. Even though you may not be ready to look at homes or have even developed your house budget, by starting to follow the new listings now you will develop a better idea of the market and current values. Then when it comes time to get serious about looking in the Spring and Summer you will already have an idea of what your budget can afford. You will also have a good handle on which homes represent good value and which are overpriced.

                          Stay warm and call us if you have questions about the home buying process. Thank you.

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                                I just wanted to say that using a flat fee listing is really the way to go. We did and we had a wonderful experience. Thanks.

                                The Buy/Sell Dilemma

                                We are often asked what is the best strategy for buying a home when you have to sell your current home. Unfortunately there is no correct answer or optimal strategy. Instead you have to evaluate each buyer's personal situation in rendering advice.

                                For instance, if a buyer is only looking to move if they purchase a specific property then the best strategy is probably to negotiate with the seller of the specific property first. If the buyer cannot come to an agreement on the specific property then there is no point in listing their current home for sale. On the other hand, if the buyer can come to an agreement with the seller then the buyer will want to list their current home for sale as quickly as possible.

                                In contrast, if a buyer is set on moving regardless of a specific property coming for sale then the buyer would probably be best advised to put their house on the market immediately. The buyer can then start to identify types of properties and areas they might be interested in. By the time their home sells they will have likely identified one or more homes that suit their needs.

                                In either case, sellers of homes are very wary of home selling contingencies. In the first scenario above, the buyer may have to agree to a so-called "kick out clause", where the seller can continue to market the home to other buyers and should the seller find another purchaser before the buyer can sell their home, the seller can terminate the contract with the buyer.

                                Most sellers will agree to a provision in contract that terminates the kick out clause upon the buyer signing a contract for the sale of their current home.

                                If you have a question about your specificsituation, please contact us. We're here to help.

                                Procuring Cause in Vermont

                                There seems to be a misunderstanding of what the standard is for "procuring cause" for a real estate agent to be entitled to a commission as a buyer's representative in Vermont. The Vermont Supreme Court has set the standard under Vermont law. Buyers (and sellers) should be aware of this standard when a real estate agent claims that they are owed a commission as the "procuring cause" of the sale. The legal standard is as follows:

                                1. It is not enough to simply show the property once or even twice to a buyer. The Vermont Supreme Court has said " [T]he assumption that the broker first interested [the purchaser] in buying the property is not enough to constitute him as the procuring cause of the sale. Although the brokers efforts need not be the sole cause of the sale, it is essential that they dominate the transaction and amount to something more than an incidental or contributing influence. If it were otherwise, every broker who has any concern with the property might earn separate commissions on a single sale. 123 Vt. at 154-155, 186 A.2d at 183. Thus, the agent must demonstrate that they were the dominate agent in the transaction and assisted the buyer in more than just seeing the property. The agent must show that they advised and assisted the buyer throughout the transaction until the purchase was complete.

                                2. Under Vermont law, to be entitled to a commission, "a broker must show that he procured a purchaser ready, willing, and able to purchase at the price and upon the terms prescribed by the seller." One example where the agent would not be considered the procuring cause under this standard is where the buyer is shown a property prior to selling their home. If the buyer cannot purchase the new property until they sell their existing home then the buyer is not currently "able" to purchase the property. The agent must continue working with the buyer until they are "able" to purchase to be considered the procuring cause. (See Ellis-Gould Corp. v. Kelly, 134 Vt. 255, 257, 356 A.2d 497, 498 (1976)). Thus, in this example the agent would have to be assisting in the purchase at the time that the buyer's house is sold.

                                3. Finally, the agent claiming to be procuring cause must also show there was continuity and no break in the chain of events. If the agent shows the property in January to a buyer but the buyer decides to hold off on a purchase until June, the agent who first showed the property would not be entitled to a commission as the procuring cause unless the agent continued working with the buyer in June when they decided to purchase the property. If the buyer hires another agent in between January and June, the new agent would be entitled to the commission as the procuring cause.

                                An agent claiming a commission as the "procuring cause" must be able to show that each of the factors above have been satisfied. If they cannot then, under Vermont law, the agent has not met the legal standard of "procuring cause" and is not entitled to a commission.

                                Hopefully this helps clarify some of the confusion.

                                If you still have questions about procuringcause, or any other real estate lingo, contact us.

                                Radon Misconception By Agents

                                Many agents seem confused on what levels of radon, if any, are acceptable in a home. There seems to be an industry wide misconception that the EPA recommends that action to reduce radon levels only be taken if a test shows levels exceeding 4.0 Pi/Cl. This is wrong.

                                The EPA recommends that homeowners consider reducing radon levels if a test shows that level exceeds 2.0 Pi/Cl (www.epa.gov/radon/aboutus).

                                Real estate agents representing buyers should not recommend that their buyers accept a home with levels under 4.0 Pi/Cl. The agent needs to look out for the safety and interest of their buyer. The buyer should be able to make an informed decision for their family. Some families may be fine with levels between 2.0 Pi/Cl and 4.0 Pi/Cl, while others may not. At the very least each family should be able to decide for themselves without being forced to continue with a transaction for a home that they may not feel completely comfortable with purchasing once they know the radon levels.

                                If you have any questions, or would like more information, please contact us.

                                Time for A Change

                                How is it that despite incredible advancements in the technology available to real estate agents and tremendous increases in agent productivity and efficiency is it possible that the commission charged by most firms has not changed in the last 30 years and is still 6% of the sales price? That defies every basic economic principle. I cannot think of another service industry where advancements in technology and productivity did not lead to lower prices.

                                One comparable example is stock brokerage firms. Firms used to charge hundreds of dollars to execute trades for their clients. Enter companies like E-Trade and Scott Trade who offered to execute trades for $15 or less. Now most brokerage firms do not even charge their clients to execute trades. Instead they focus their services on advice and wealth management.

                                In addition to being more efficient, studies have been done that demonstrate that real estate agents do not end up securing higher prices than homeowners that sell their own homes. In fact Steven D. Levitt and Stephen J. Dubner cite these studies in their book Super Freakonomics leading them to conclude that when analyzing which type of agent provides greater value a pimp or Realtor, "it seems clear that a pimp's services are considerably more valuable than a Realtor's."

                                The role of an agent has changed. Like changes in the stock brokerage industry, the role of an agent these days is to utilize their knowledge as well as the technology available to them to provide advice for their clients. Their role is not to be a market maker helping buyers and sellers find one another. The internet allows buyers and sellers to find one another. Instead, buyers and sellers need advice through the process once they find one another. That is the role of the agent and the fees charged should be commensurate with the services provided.

                                It is time for a change.

                                If you agree with us, then Flat Fee is the real estate company for you. Comment below and let us know what you think, or contact us here.

                                Flat Fee in vermontbiz.com

                                From yesterday's (04/13/12) vermontbiz.com

                                According to analysis of the MLS (Multiple Listing Service), real estate sales in Vermont increased by slightly over 10 percent in the first quarter of 2012. Compared to last year, MLS data for 2012 shows 955 sales while the first quarter of 2011 saw total sales of 867. This increase can be attributed to increased buyer confidence that the housing market is starting to return to equilibrium after 2008s Great Recession.

                                While we still arent seeing the same level of confidence that we did in 2006 or 2007, it is greater now than at any point during the prior four years, said Rob Foley, owner of Flat Fee Real Estate in Burlington. MLS data shows that Chittenden County experienced an increase from 224 sales in the first quarter of 2011 to 243 sales in the first quarter of 2012, and the median home price increased by $1,000.

                                While experts warn that the national housing market could suffer another blow from the shadow market of foreclosures (proceedings that banks have been delaying until the robo-signing litigation is completed), Foley believes that the Vermont market will be largely unaffected, and will continue its recovery. The Vermont market is more stable, and in better health, than national markets. Our state sees less speculative housing activity, lending practices are more conservative, and inventory tends to track carefully to primary home ownership demand, all of which lead me to expect a continued recovery of Vermont home prices.

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