VT Real Estate Trends

Real Estate Agent Pay - Chittenden County

The average Vermont family make $51,200 per year. What do you think real estate agents make?

According to data from the MLS and based upon the traditional 6% commission model charged by other firms, the top 5 agents in Chittenden County so far this year (January to July 22nd) have made between $292,000 and $587,000. Thus, they are on pace to make between $600,000 and $1,000,000 this year alone.

It is remarkable during the worst recession in history that real estate agents in a small community like Chittenden County can make in excess of $500,000 per year, much less $1,000,000 per year, and continue to get away with it.

We believe the public should demand fairer compensation models from real estate agents. We believe that our flat fee model represents a fairer compensation model and keeps our compensation much more in line with average Vermont incomes.

Thank you.

Comments

  1. rfoley on

    Thank you for your comment. Our model is doing quite well. Thank you for asking. Our sales volume has been growing by approximately 100% annually since our inception. In regards to skills and knowledge base, I used to be a real estate lawyer. I also have bought and sold for myself over 20 times. I now own over 60 units with approximately 180 tenants. Additionally, I own a property management company that manages over an additional 300 units. In regards to clients suffering, you can read the testimonials on our website. Our clients do not suffer. They are grateful that someone has finally offered an alternative to the overcharging model of 6%. On average our clients save between $5,000 and $12,000. In regards to marketing, we probably spent more per client than any firm in Vermont. I assume you are not in Vermont otherwise you would know that we run tv ads and our one of the primary sponsors at the largest athletic events in the State. However, I digress to the real point. Rather than attacking our model, I think agents that charge 6% need to begin justifying their rates. We can justify ours. How do you justify charging 6%? (3% to the seller's agent and 3% to the buyer's agent). Most agents try to cry poverty when asked to justify their rates. They will tell sellers that "I only make 1% after I pay my firm and they pay their national franchise fees". If that is the case then the overhead in your model is too high. Just like any business with high overhead, it is doomed to fail. You need to reduce your overhead, as we have, so that you can reduce your rates. We are a full service company. We simply charge a fair rate and that is why the market has embraced the model so quickly and wholeheartedly. We look forward to helping more and more people realize that they do not need to pay 6% to get high quality real estate services. Thank you again for your comment.
    • Derek Gilbert on

      To all the seller's reading this Realtors typically make 3% of a sale. 1% goes to the broker. 1% goes to taxes, fee's, admin, & marketing, 1% actually goes to the broker. If the genius that posted this blog is trying to get your business how much do they spend on selling your home. Like any successful business there is always a 95/5 rule. 5% of the agents perform 95% of the business because they are good at what they do. Ask this company to show you their books and business volume. It's probably crap. Good luck trying to discount your service because you don't have the skill to do it any other way. In the long run the client suffers. There is a reason why the founding CEO of helpusell sold his house with a full service company. The model is a failure.
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        Public Buildings and Fire Marshall Inspections

        Any residential multi-unit building in Vermont is considered a "Public Building" and subject to Vermont's Public Building Regulations. Multi-unit buildings are any residential building other than a single family detached home. Thus, a duplex, a condominium unit, an attached townhouse and apartment buildings are all subject to the Public Building regulations in Vermont.

        Over the past 3 years, attorneys have developed a belief and standard of practice for Public Buildings. Attorneys have begun requiring that every seller of a Public Building, including a condominium unit, provide either a current Public Building Certificate of Occupancy or have an inspection performed by a Fire Marshall proving that the building meets current life safety codes.

        Despite the best of intentions of attorneys to protect their clients, this new system created by attorneys is a nightmare for anyone selling an apartment building or condominium building in Vermont.

        Prior to attorneys insisting upon inspections, sellers of a condominium units and apartment buildings did not have to conduct inspections because the Public Building Regulations specifically allowed existing buildings to remain in use unless they were deemed an imminent threat to human safety.

        Under the new system, the current owner becomes solely responsible for bringing their building or unit into compliance with current codes even if the building or unit complied with the code that existed at the time that the current owner purchased it. For instance, many condominium buildings were built in the 1980's in Chittenden County. Many of these buildings have windows that met 1980's egress standards but do not meet 2011 egress standards. If the owner of one of these units wants to sell, they will have to replace the windows to meet current egress standards. For many owners who are simply trying to break even on the sale these days, the extra expense for new windows is often cost prohibitive.

        In addition to the additional costs to sellers, the new inspection requirement has created a bureaucratic mess. The State Fire Marshall's office was never consulted on this new inspection requirement. The system was created by lawyers to protect their own liability. As a result, the State Fire Marshall's office does not have the resources to conduct the number of inspections required.

        I recently had a client who called the Fire Marshall's office to schedule inspection. The client called three times over a two week period and left messages. He finally received a call back. The inspection was scheduled for the following week (3 weeks from the initial call). At the inspection, the Fire Marshall told my client that he would get the report to him as quickly as possible. My client did not receive the report for 3 weeks. So in total, it took 6 weeks to simply receive the report.

        Upon receiving the report, there were errors in it. In order to rectify the situation my client had to get in touch with the Fire Marshall to get a corrected report. Additionally, although the building was built in 1900, the Fire Marshall required the building to be brought up to 2011 standards. In order to bring the property into compliance, my client had to obtain a variance for certain items and spend approximately $5,000 to rectify other issues.

        The whole inspection process delayed the closing and put the entire transaction in jeopardy.

        I do not have a problem ensuring that buildings are safe, but laws provide for "grandfathering" for a reason. To place the entire financial burden on the existing owner even if the building has been considered safe for more than 100 years seems absurd. Furthermore, to have a system that takes 6-10 weeks when most parties want to close within 45 days of the contract being signed, places a tremendous obstacle on an already battered real estate market.

        Flat Fee takes pride inadheringto regulatorybuilding safety codes. We do everything we can to make our properties safe for all who may enhabit them. Questions? Concerns? Contact us here... or leave a comment below!

        Comments

        1. Yanan Shang on

          Can I not sell my condo (1/2 of a house) until I have a Firemarshall inspection? We live in Colchester near Mallets Bay. Thanks
          • Tom Cull on

            From my experience as a first time home buyer, make sure that the Fire Inspection happens as soon as you have made an offer. The seller may not be aware if they are FSBO and bought years ago, when it might have been up to code. Egress windows are no drop in the ocean to install and the seller may or may not be willing to pay for it or at least split the cost. It's so easy to market a property as 'finished living space' but a seller needs to be cautious if that's really not the case. Very interesting post!
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                  Proposed Bill Requiring Sellers to Get Energy Audits

                  A bill was recently introduced in the Vermont Legislature which would dramatically change the requirements for selling a home in Vermont. Under the bill, sellers of a home in Vermont would have to hire a professional to perform an energy audit of their home. The seller would have to pay for this audit. The seller would be required to provide the results of the audit to every prospective buyer of their home. The audit will contain a scoring system based upon the home's efficiency relative to other homes in Vermont. The audit will also contain a list of recommended improvements to make the home more efficient.

                  While well intentioned, this bill would actually impose a penalty on owning a home in Vermont.

                  Here is an example of the average transaction in Burlington, Vermont and how this bill constitutes a penalty on existing homeowners:

                  A young couple owns a small ranch house in Burlington that was built in the 1950's. It is their first home and they bought it in 2006 during the peak of the market for $220,000. Because an energy audit was not required or the routine practice when buying a home in 2006, the owners did not have an energy audit at the time they purchased.

                  The young couple has a child who is 3 years old and are expecting their second child in a few months. They determine that their new family will need more space and decide to sell their home.

                  If this bill is adopted, they will have to conduct an energy audit. Their home will likely receive a low score because their home will be compared to new homes in Vermont rather than being compared to other homes in their neighborhood.

                  The owners now have to provide the low score to prospective buyers. The buyers will require that the recommended energy improvements found in the audit be made by the seller before the closing. The owner will have no choice but to acquiesce if they want to sell their home.

                  The home ultimately sells for $205,000 because of the decline in the market over the past 5 years. In addition to getting $20,000 less than they paid, the buyers spend an additional $7,000 to make the home energy efficient. Thus, their total loss is $22,000 or 10% of their initial investment.

                  The buyers now have an energy efficient house at the sole cost of the esellers. The buyers benefit because they happen to be the first purchasers of the home after the law was adopted. The seller is the only loser because they happened to be the owners of the property at the time the law went into effect.

                  Why should current property owners bear the entire burden of making existing homes more energy efficient? Property owners have already paid a transfer tax to the State for purchasing the home. Property owners have already paid annual property taxes to the City to help fund the City's services. Property owners have already stimulated the economy by purchasing the home and paying third parties in Vermont for appraisals, inspections, legal advice, brokerage advice, title insurance, bank fees and other fees associated with purchasing a home. Instead of rewarding homeowners for their commitment to Vermont, this bill would penalize for it.

                  The Legislature should allow the free market system to work here. Homeowners will make an energy improvement to a home if the cost of the improvement justifies the savings that will be achieved. Why should a property owner have to spend $7,000 in energy improvements if the savings will be $5 per month? It would take almost 12 years (without factoring for inflation) for the improvement to pay for itself.

                  In Burlington there is currently an Ordinance that requires apartment owners to have an energy audit performed in buildings where the tenants pay the heat prior to the sale of the property. The City can require energy improvements to be made. However, the property owner is not required to make more than $1,300 per unit in improvements and does not need to do any improvement if the savings achieved per year is less than 10% of the total cost of the improvement.

                  While I do not think that any bill should be adopted for existing single family homes, at a minimum, the State should look at a program like the one Burlington has for apartment buildings. At least then property owners would know the maximum cost and there would be equality when selling a home.

                  If this bill is adopted, owners of older homes will see their values plummet even further. This is not the time nor place for this type of legislation.

                  Feel free to contact Flat Fee at anytime, here.

                  Comments

                  1. Park city ut real estate on

                    Hi, The introduction of mandatory energy audits marks a government intrusion into the free marketplace, which is unprecedented in Canadian history. Thanks, Perk.
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                      Burlington VT Real Estate

                      FlatFee RealEstate is headquartered inBurlington, Vermont along the shores of Lake Champlain. Its founder,Rob Foley, is also a resident of Burlington,Vermont.Rob and his wife also attended the University of Vermont inBurlington.

                      Because of these ties, FlatFee RealEstate has a great wealth of knowledge about Burlington real estate and the real estate in surrounding communities.

                      Burlington has a population of approximately 42,000 according to the most recent census data. While theCensus data shows that Burlington's population's increased by 7% over the past decade, it appears that much of the growth may be due in large part to increases in enrollment at the University of Vermont and ChamplainCollege.

                      For those looking to make a move, Burlington represents a great alternative to larger metro areas like Boston. While it does not have all of the amenities that you will find in a large City,Burlington has many of the key amenities found in larger cities.

                      First and most importantly, Burlington has an InternationalAirport. BurlingtonInternationalAiport is served by major airlines, including JetBlue, US Air and Delta.

                      Second, Burlington has a prominent teaching hospital,Fletcher AllenHealthcare. Burlington is probably one of the only cities inAmerica with less than 50,000 residents that is served by such a high class medical facility.

                      Third, Burlington is home to several educational institutions, including the University of Vermont and ChamplainCollege. Thanks to the stability of employment created by these institutions, Burlington's current unemployment rate is less than 1/2 the national average and lower than the average in the rest of Vermont.

                      Fourth,for a small City, Burlington has the cultural resources of a larger city. Burlington was recently named one of 10 cities inAmerica for "foodies" to visit. Burlington also has musical and theatrical venues such as the FlynnTheater and Higher Ground.

                      Finally, because it is located on the shores of the 120 mile long Lake Champlain, the outdoor activities rival that of any City located along the eastern or western seaboard.

                      In addition to having the amenities of larger cities, Burlington has attributes that make living inBurlington better than living in a major City. First, Burlington's real estate market is more stable than many large metro areas. The stability of its institutional employers, such as UVM, and its size help ensure that Burlington real estate will not suffer the major swings that we see in other more volatile areas.

                      Second, Burlington has a better quality of life for raising families.In Boston, many parents endure average commutes of 1 to 2 hours. In Burlington, your average commute will likely be less than 10 minutes. Also, there is a lower crime rate and cleaner air than in larger metro areas.

                      Third, travel is easier. Whether by car or plane, it is easier to escape a smaller City like Burlington than a large metro area such as Boston.

                      Finally, there are few sights that can rival a sunset in Burlington. Sitting along the shores ofBurlington peering back toward the purple and orange glow above the Adirondack will make you wonder why you ever lived anywhere else.

                      To learn more about Flat Fee and Vermont real estate, contact us anytime.

                      Vermont Real Estate Prices

                      There was a story recently that Vermont's real estate had actually appreciated in price by 17% from the 3rd quarter of 2009 to the 3rd quarter of 2010. While the data supports this statement, it is important to analyze the data to figure out the cause of the jump.

                      The jump in prices was an increase in the median home price. The median home price of Vermont homes is the point at which half (50%) of the homes sell over that price and half (50%) sell for under the median price.

                      The reason that the median prices increased in the 3rd quarter of 2010 is that it was the first quarter since 2008 that a first time homebuyer tax credit was not available. The first time homebuyer tax credit provided a great incentive for first time purchasers to buy and they did in droves while the credit was available.

                      The result of the large number of the first time homebuyers in 2009 and the 1st and 2nd quarters of 2010 caused a drop in the median sales price. This occurred because first time homebuyers tend to purchase less expensive homes than people buying their 2nd or 3rd home.

                      While I would like to be more optimistic about the data, I think buyers and sellers need to be realistic about what the data actually is showing. If we can see the same growth for consecutive quarters then I think the data would be valid.

                      Impact of National Franchises on Local Property Values

                      First let's review how national franchise companies make money from local real estate transactions. The most common model of compensation is a percentage of every transaction is paid to the national company by the local brokerage firm. Typically a local brokerage firm will pay the national company 8-10% of their fee from every transaction. Thus, if a broker sells a home for $300,000 and charges a 6% commission, the broker pays the national company $1,800 of that commission.

                      The question is not whether these companies make money (we know they do), but how does a national affiliation help a buyer or seller. The short answer is that they do not help buyers or seller locally.

                      The level of service provided by brokers without national franchise affiliations is the same as those with national franchise affiliations. There is nothing locally (MLS, Realtor.com, Free Press, etc...) that requires a national affiliation or that is benefited by a relationship with a national franchise company.

                      While the service level provided is the same, brokers with a national affiliation must charge buyers and sellers more. As described above, brokers who have national affiliations must pay the national franchise company. Because of this, they must pass along this cost to their clients. Therefore, if you choose a firm with a national affiliation, you will likely pay a higher rate or the broker will have less room to negotiate their fee because of the extra fees paid to the national company.

                      Because brokers with national affiliations must charge more, the cost of these relationships eventually trickle down to each transaction and make property more expensive locally. As I pointed out in the last issue, broker fees are a transactional cost that is added to the price of property in every transaction. Ultimately, if the seller needs to pay their broker more because their broker has a national affiliation, then it only stands to reason that the seller must factor that into the price of their home when selling. The seller then passes that cost along to the buyer by making the buyer pay a higher price for the home to cover their broker's fees.

                      Therefore, at the end of the day, property is more expensive locally when national franchise companies are present.

                      Even though national brands may lend immediate credibility to a broker, they do little to directly help the clients of the broker. In fact, many of the most recognizable brands are owned by the same company (Realogy), including Coldwell Banker, Century 21, ERA and Sotheby's. It is difficult to see how clients benefit when such an inherent conflict exists in the national company supporting the various brands.

                      The only way that national franchise companies can make more money is to sell more franchise units. They are constantly looking to increase the number of franchise units in the same market area. Most national companies are willing to have the same brand located within 1/2 mile or less of another office owned by a different broker. Thus, you might have the same brand in the same town with two or even three different owners.

                      Flat Fee Real Estate has not and will not affiliate itself with a national franchise. We want to continue providing our services for a flat fee of $3,500 per transaction and do not believe that we could if we were to partner with one of these companies who keep pressure on brokers to maintain the traditional 6% commission based model. We also want to ensure that local property remains more affordable for our clients by not having to pass along the costs of a national franchise to our clients.

                      Selling In the Internet Age

                      Selling In the Internet Age

                      The internet has dramatically changed the way buyers of real estate search for property.

                      No longer do buyers spend hours on a weekend attending multiple houses. Gone too are the days when buyers read the paperto findreal estate listings. Buyers no longer even rely upon real estate agents to send them listings. Instead, buyers now do the majority of their own legwork and they do that legwork almost exclusively online.

                      Buyers typically start their search at a well known website like Realtor.com. They enter their general search criteria. They then begin to weed out the listings based upon the content they find online. Buyers tend to be attracted towards listings with more online content. For instance a buyer is more likely to click on a listing if there is a link to a video tour because it helps give them a better sense of the property. In a similar vein, buyers are less likely to click on a listing if it has very little content such as only one exterior picture of the building.

                      Once the buyers narrow down their list to 2-5 properties based upon their internet search, they will call their real estate agent and tell their agent which listings they want to see. The agent schedules the showings and helps the buyers in analyzing the property, buthas little to do with the actual selection of listings.

                      Because of the changes in the search process, Sellers need to adapt their marketing efforts to distinguish their listing online. It is important that sellers try to provide as much online content as possible. For instance, sellers should not only have pictures posted online but if possible should also have a video tour produced that can be viewed online by buyers. Sellers should also consider creating a separate website for their property so that there is simply more interaction for a buyer to experience online.

                      At Flat Fee Real Estate, we have adapted our marketing efforts to the new reality of the property search process. Since our inception we have created separate websites for our clients to help their listings standout online. We have also had videos produced for most of our listings. We have anecdotal evidence that buyershave beenmore attracted to our clients' listings as a result of the content provided online.

                      In addition to changing the way buyers search, the internet has made real estate agents much more efficient. Buyers are doing most of their own searching so the total number of hours required of a buyer's agent has been greatly reduced. For listing agents, the information and online tools help greatly reduce the time it takes to perform a market analysis and communicate this information to prospective sellers.

                      Because the interent has reduced the overall time commitment of each transaction, it stands to reason that the fees charged for the service should be reduced. That is why we have been able to offer a service that has historicallybeen charged at a 6% commisionfor a flat fee of $3,500 per transaction.