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Selling

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.

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.

Exploring the Radon Issue

Earlier this week one of the principal real estate brokers of the largest firm in Burlington suggested that my company's Radon Addendum "incorrectly states that 2 pCi/L is the US EPA recommended acceptable level for radon. The actual level recommended by the US EPA is 4.0 pCi/L."

I would understand if a junior agent made such a comment but for a principal of the largest local firm to make such a statement stunned me. Here is language directly from the EPA's website: "EPA recommends that Americans consider fixing their homes when the radon level is between 2 pCi/L and 4 pCi/L."

Clearly the EPA does not think that 4pCi/L is an acceptable radon level and our Radon Addendum correctly states the EPA's position.

I urge all real estate professionals to educate themselves so that they know of what they speak. To learn more about EPA's radon regulations, click here.

If you still have questions about radon or any other housing regulations, contact us here.

Comments

  1. Concerned on

    From the EPA Radon Site: EPA Recommends Test your home for radon — it's easy and inexpensive. Fix your home if your radon level is 4 picocuries per liter, or pCi/L, or higher. Radon levels less than 4 pCi/L still pose a risk, and in many cases may be reduced.
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        Is smoking that bad for you? Is there a "science-settled" link beewten smoking and cancer?I have been a smoker for about 25 years. No cancer. My pulse and BP are the same as they were when I was a teenager and have never varied in my life.My grandfather was a heavy smoker all of his life. He died after his 90th birthday ... not cancer.I'm not saying that smoking doesn't cause cancer. I'm just not convinced that it does either. Seriously - when did any government agency present anything other than their declaration that they have determined an industry (a big one) was bad for you and should be heavily taxed and regulated?

        The Inherent Conflict of Buyer Agent Pay

        Most agents that represent buyers require the buyers to pay them a percentage of the purchase price as their fee for assisting in the purchase of a new home. There is an inherent conflict in this model.

        A buyer agent has a fiduciary obligation to act in the best interest of their client. However, because the buyer agent requires their client to pay them a percentage of the sales price, the agent's interest is actually in conflict with the buyer's interest.

        The buyer's interest is to pay as little as possible for the home. In contrast, the agent's interest is to get paid as much as possible for each transaction. Because the agent gets paid more if the buyer pays more, there is a divergence in the interest of the client and agent.

        Arguably this inherent conflict is itself a breach of the fiduciary obligation an agent owes to its buyer clients. We recommend that buyers fully discuss this potential conflict with their agent before signing any agreement.

        At Flat Fee, we do things differently. We charge lower fees and will set you up with exactly what you need. Don't want a full service agent? At Flat Fee, you don't have to pay for one. To learn more about what makes Flat Fee different from other real estateagencies, check out our website.

        If you want real estate done different, go with Flat Fee. Contact us here.

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                                              Don't Be Bought

                                              Because of the emotional aspects of homeownership, it is natural when selling a home to believe that your house is better than any other comparable property on the market and as a result is worth more than any other comparable property.

                                              Real estate agents are very cognizant of these feelings and some unscrupulous agents will prey upon these emotions to help secure your business.

                                              Some real estate agents will intentionally provide a homeowner with an unrealistic valuation of their home when trying to secure their listing. The theory is that if the agent can secure the initial listing that they can later convince the seller to reduce the listing price to a more realistic one.

                                              It is normally easy to convince sellers to reduce the price after the initial inflated listing price because the seller sees little activity at the unrealistic price. The agent will say something like, "in a good market your home would have sold quickly at this price, but because we are in a challenging market I think you need to reduce the price to help stimulate activity."

                                              The practice described above is known as "buying a listing" and it is unethical. Please "Don't Be Bought". Thank you.

                                              If you want a real estate company you can trust, contact Flat Fee.

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