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Real Estate FAQ

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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      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.

      Benefits and Pitfalls of "Rent to Own"

      Leasing to own or more commonly known as "rent to own" is in essence the "layaway" of real estate. However, unlike setting aside consumer goods, renting real estate to eventually own presents a number of practical and legal challenges not found with consumer goods.

      In the rent to own situation, the buyer and seller typically enter into a purchase and sale contract that stipulates the buyer shall be entitled to pre-closing occupancy of the home. One major difference between the rent to own contract and your standard purchase and sale contract is that the seller will likely require a much larger good faith deposit from the buyer. The reason for a larger deposit is that the seller is being asked to bear greater risk than in the normal context because of the longer duration between the execution of the contract and the closing.

      In addition to a purchase and sale agreement between the parties, the buyer and seller typically enter into a lease agreement. The creation of the landlord-tenant relationship between buyer and seller is the second major difference between the rent to own contract and the standard purchase and sale contract. It is this difference that creates the greatest practical and legal challenges.

      From a practical perspective, the buyer essentially gets to take a long term "test drive" of the home that they are supposed to purchase. The buyer may discover after living in the home for a time that they really don't care for the home or there are particular issues that they just rather not address as the eventual owners. Unlike most buyers that may suffer slight buyer remorse, a buyer that rents prior to owning can suffer from tremendous buyer remorse. If this happens then it is likely that both the landlord-tenant relationship will deteriorate and so to will the buyer-seller relationship between the parties.

      From a legal perspective, the rent to own situation can lead to unusual situations not found in your normal purchase and sale. For instance, if the buyer and seller in a non-rent to own situation disagree, the two parties can simply part ways. In the rent to own, this is not possible. If a dispute arises in the rent to own situation, given the legal protections of tenants under most state laws, then the seller will need to begin an eviction to terminate their relationship.

      While there are negative implications in the rent to own scenario, there are of course benefits. This type of situation is particularly beneficial where the seller has already moved because they get a party to occupy the property and cover the carrying costs while knowing that in most circumstances they will eventually be selling the property to their tenant.

       

      If you're still curious about rent-to-own, or have any other questions for Flat Fee or Rob Foley, contact us here.

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      Monopolies and Lobbyists

      Have you ever wondered how the oil industry has been able to maintain its monopoly of selling gasoline in the United States when advances in technology have led to cheaper and more efficient alternatives? Not only are the alternatives cheaper and more efficient, the overwhelming majority of Americans support these alternatives because they have grown sick of being forced to use only one form of fuel for decade after decade.

      Despite overwhelming support for cheaper and more efficient alternatives, oil companies have been making greater profits than ever before thanks in large part to the rises in gasoline prices. You would have thought that with cheaper and more efficient alternatives available that the prices would have come down rather than go up. In my opinion only one thing can explain this continued dominance, it is efforts by oil industry lobbyists to intimidate the competition and discredit their alternative models.

      It is unfortunate in this Country that there are business groups that still support monopolies such as the one that the oil industry continues to maintain. Instead of lobbying for policies that protect their monopoly, the oil lobbyists should explain to the American people why oil is better than the alternative models. Unfortunately, the oil lobbyists cannot do that because they know the alternatives are better and that the public desires the alternative fuels more than oil.

      Because they cannot convince the public that oil is better, they instead focus on efforts to discredit the alternative forms of energy. For instance, for years the technology has been available to have hydrogen fueled cars. Despite public demand, efforts have been slow to develop and provide this technology to the public in part because the oil industry has engaged in a campaign to discredit hydrogen fuel. The oil industry has created the perception that hydrogen fuel is volatile and thus unsafe for the public. In essence, the oil industry has portrayed itself as the proven historic safer model.

      I believe that any group that must rely upon lobbyists to discredit the competition should be ashamed of themselves. Instilling fear and discrediting cheaper and more efficient models offends the principles of our American economic model. America has progressed thanks to healthy business competition and if groups are allowed to stifle that competition, it will harm our economy and our ability to improve as a Country.

      At Flat Fee, we think outside the typical realty box. We are about our community and the environment in which we live. If you want a sociallyconsciousrealtor, contact Flat Fee.

      Why Do Real Estate Agents Still Use Print Ads

      Why do real estate firms continue to run traditional print ads of their listings in newspapers and other circulations?

      A common immediate response is that they do so to help market their clients' properties. However, this is not true.

      Since the proliferation of the internet, buyers no longer wait for print ads to find homes. Buyers are looking almost exclusively on the internet. Buyers have instant access to every listing and unlike print ads, the internet allows buyers to limit their search to certain criteria.

      If buyers are not looking at print ads to buy homes, then why would agents spend millions of dollars annually running print ads of listings in local newspapers? The answer is simple. Real estate firms and agents run ads simply as self marketing tools to promote their own businesses and not their clients' listings.

      Real estate firms use traditional print ads to create a perception that they are the better than other firms in town because they have more listings in the paper. Sellers are duped into thinking that if their ad appears alongside these other ads in the Sunday paper that somehow a buyer is going to be more likely to buy their home than if they listed with another firm. This is a ridiculous concept.

      In fact most firms do not have enough space in their allotted newspaper ads for all of their clients' listings. Many firms will allow each agent to publish only one of their listings in the weekly paper. Thus providing further proof that the primary purpose is not to market the client's listing but to market their own businesses.

      Sellers actually are paying higher fees because of print ads for listings as well. Firms claim that part of the benefit of listing with their firm is a weekly print ad in the newspaper. Firms say that they need to charge a 6% commission to cover these listing costs. However, the benefit of the ad is for the firm and agent and not the seller. As a result, sellers are subsidizing their agent's marketing efforts.

      Sellers should not be asked to subsidize the marketing costs of their real agent and firm. If agents and firms want to market their business with print ads, then they should do so with ads touting the benefit of their services. Unfortunately, because all firms charge the same 6% commission and offer the same services, the only way they can distinguish themselves is by showing more listings in the newspaper.

      As I stated before, buyers are not looking at print ads. They are looking online. Sellers need to stop being coerced by real estate agents into thinking that print ads still matter for marketing property. Print ads work very well for products such as small electronics or supermarket coupons, but print ads are dead as far as real estate is concerned. Agents should stop asking sellers to subsidize their marketing efforts and pay for their own ads.

      We know the trend of the modern person. At Flat Fee, we're doing all we can to help make the real estate buying and selling process easier than ever before. We've set up an easy-to-use website that will help with all of your property needs. Still have questions about Flat Fee? Contact us here.

      Why Do Agents Double Dip?

      While many of you may think that this article refers to the classic Seinfeld episode where George Costanza dips a chip, bites it and dips again, it is not. It is however about something equally ridiculous: real estate agents double charging their clients.

      The typical commission in a real estate transaction in Vermont is 6% of the sales price (I think it is well documented in this blog and on our website www.flatfeevt.com that this amount is excessive so I will refrain from commenting on that aspect in this blog). Typically the listing agent will split the commission equally between themselves and the buyer's agent. Thus, in a typical transaction the seller pays a 3% commission to their agent and a 3% commission to the buyer's agent.

      The ridiculousness comes when the buyer is unrepresented. Instead of doing the decent thing and reducing the overall commission to 3%, the seller's agent will insist upon keeping both their 3% commission as well as the buyer's 3% commission. Thus, the agent gets paid twice for a total commission of 6%.

      How can these agents possibly justify this "double dip"?

      Some agents will attempt to justify this "double dip" by suggesting that the transaction will require twice as much time. This is absurd. The transaction may require a couple of extra minutes or possibly an hour, but certainly nowhere near double the amount of time. The amount of work certainly does not justify insisting upon a double payment.

      At Flat Fee Real Estate we learned from Seinfeld and do not double dip. We believe other firms should follow. To learn more about how Flat Fee works, click here. Still have questions? Contact us any time of day.

      10 Tips for Selling Your Home

      The 10 Home-Selling Tips

      Most Real Estate Agents Wont Tell You

      How to market and sell your home with minimal stress and maximum profit

      New technologies and real estate resources have made it easier than ever for real estate buyers and sellers to connect directly, without the assistance of an agent. Some of these game-changing developments make it possible for the average person to perform services which were once only attained by contracting a real estate agent, who would then collect a customary six percent commission of the homes selling price. Robert Foley, a real estate lawyer and the owner of Flat Fee Real Estate in Burlington, Vermont helps explain the growing list of alternatives to the traditional six percent commission model and provides tips for a successful sale.

      1. Know your marketing options

      Most sellers assume that they need to hire a realtor in order to gain access to the areas Multiple Listing Service (MLS). Thanks to the internet, homeowners have the ability to list in the MLS system without hiring a full-service agent. Depending on the area and MLS, the companies that offer this typically charge between $300 and $500.

      In addition to access to the MLS, sellers can utilize free services such as Craigslist to help market their property without the use of a full-service agent.

      2. Determine if you need professional guidance

      Based on knowledge and experience, some sellers are able to sell their home without the guidance of a real estate professional, like an agent. First-time sellers and those who do not have a firm grasp on the market or process of selling will likely benefit from professional guidance. For those who have sold a property before, understand the market, understand the process and have the time, hiring an agent may not be beneficial.

      3. Explore market alternatives and insist upon competitive rates

      For sellers who choose to hire a real estate professional, it is important to investigate what market alternatives exist in their area for services. While professionals in some markets continue to charge the same rate (typically a six-percent commission), most markets have competitive alternatives, such as firms that charge a flat fee regardless of the price of the home. These flat fee realtors are growing in popularity often offer the same services as more traditional professionals.

      Even if a homeowner resides in a market where all professionals claim to charge the same 6% commission rate, homeowners can still try to negotiate. Real estate professionals know that consumers have many choices when marketing and selling their home, and therefore have become more willing to negotiate.

      4. Be realistic and dont let professionals buy your listing

      Every homeowner wants to sell his or her home for as much money as possible. Knowing this, real estate agents will often tell homeowners that their property is worth more than it actually is, with the hopes that the seller will choose them over another agent that provides a more realistic house value. This practice is commonly known as buying a listing. Agents who utilize this practice first secure the listing, and then after the property has been listed at the overpriced amount, the agent will suggest a price reduction to something more realistic.

      To avoid this coercion, sellers should first try to determine a realistic value of their property. There are many online tools to help with this, and the best method is to look at the recent sales (within the past 6 months) within their neighborhood.

      5. Try to remove emotion from the process

      Selling a home is naturally an emotional experience given the many memories tied to a home. Because of the emotional attachment, decisions made regarding the sale of the home can oftentimes be less than rational. Although it is difficult, sellers need to do their best to look at the sale of their home objectively. It is common for sellers to overlook or downplay the homes shortcomings, while placing too much value on the homes features. By looking at the home through the eyes of the prospective buyer, sellers will make more rational decisions throughout the process.

      6. Dont go overboard with staging your home

      It is important that the home is staged so that it shows well, but oftentimes there is a tendency on the part of seller to go overboard in creating a natural setting. Most buyers are not impressed with techniques like lighting scented candles or playing music, and these effects can sometimes even turn them off to the home.

      7. Dont get offended by offers that seem low

      Due to the emotional attachment to a home, many sellers get offended when a buyer makes what is perceived as an insulting offer. It is important to keep in mind that selling a home is a business transaction and the buyer is trying to get the best value for his or her money. Sellers should try to appreciate that the buyer is also trying to protect their financial interests and not overpay relative to the market.

      8. Dont be afraid to make the commissions part of the transaction

      Rarely a buyer will make a full-price offer on a home. Typically, they will offer anywhere from 5-15 percent below the asking price. Sellers should understand that the realtors commissions can become negotiated as part of the transaction, with the exception of cases where a buyer makes a full price non-contingent cash offer.

      For instance, consider that a home is listed for $275,000.The buyer makes an offer of $265,000, and the seller is not willing to sell unless he or she receives a net a profit of $270,000.Thus, the parties are $5,000 apart.

      If the sale does not materialize, the agents make nothing.The seller should tell their agent that in order to make the deal work, the seller's agent and buyer's agent should each reduce their commission by $2,500 (for a total of $5,000).In this case everybody wins because the seller receives the amount desired, the buyer pays an acceptable amount and the agents make something rather than nothing.

      9. Understand the purpose of a home inspection

      Most contracts between buyers and sellers are contingent upon the buyer having the property inspected and being satisfied with the inspection results. If the buyer is not satisfied with the results of the inspection, they can terminate the contract.

      Despite what many buyers believe and despite with many real estate agents advise their clients, sellers are not required to remedy every issue raised during a home inspection and in fact, it is not fair to ask a seller to remedy each issue raised. Homeowners are not selling brand new homes, and the price reflects the natural wear and tear on the home. The seller should be willing to fix code violations and immediate safety threats.

      10.Dont look back!

      Sellers will sometimes reflect on the sale at the closing and think that they could have received more money if they had waited for another buyer. Once the closing is concluded, the seller should take their check and not look back. Life is too short for regrets!

      Still have questions? Contact Flat Fee here.

      Debunking the Myths: Listing Agents Do Not Sell Property

      There are many myths about real estate agents that have been engrained in the consumer public by decades of clever marketing by the real estate industry and its huge lobbyist, the National Association of Realtors.

      One of the biggest myths is that that the agent that lists your home actually sells your home.

      Buyers do not care who the listing agent is. In 70% of the transactions, the listing agent is not even the agent that shows the ultimate buyer the home. The buyer typically utilizes a separate agent to show them the home and to negotiate the offer on their behalf.

      One of the ways in which agents have convinced the public that the identity of the listing agent matters is to somehow convince sellers that they have a "network" of buyers just waiting for a home.

      How ridiculous is this notion these days? Agents do not have some secret network of buyers just waiting for a home. Buyers no longer rely upon agents to find them homes. Buyers find their own homes on the internet.

      The buying public has become extremely savvy. In fact, they are now suspicious of listing agents. They typically have a distrust for what a listing agent will say about a home. This is yet another reason why so many buyers seek representation from their own agent.

      Even though a person's home typically represents their most valuable asset, selling a home is now more commoditized than ever. The proliferation of the internet and available information has made the searching for a home easier than ever before.

      Today's agents are no longer expected to be salespeople. Agents today are expected to be advisers of the process of buying and selling a home. Thanks to the internet buyers and sellers can find one another without agents. They just need a little advice on how to negotiate the process.

      Given that agents are now advisers and their services are more of a commodity than ever before, shouldn't their fees have gone down from their historic 6% commission model?

      We believe that eventually the market will see through the clever marketing and myths created by the real estate industry and will be forced to change their pricing structure.

      From the beginning Flat Fee has taken the approach that our most important role is to be an adviser and that we should charge a fair price for that service. Hence, we never adopted the ridiculous 6% pricing model and instead have charged a flat fee for our services.

      To learn more about Flat Fee's pricing model, click here.

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