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Blog :: 2011

The Commission Model's Role in Our Financial Crisis

It has been well documented that our current financial problems and recent financial crisis were the result of the bursting of the housing bubble. Investment banks and others sold bundled mortgaged backed securities and insurance against defaults on the those securities based upon the premise that housing prices would always appreciate. Even Ben Bernake when pressed on the downside risk of the derivatives market said, prior to the financial meltdown, that it was unlikely that housing prices would decline in any serious or prolonged way and thus the risks of the housing bubble bursting were minor.

Books such as the "Big Short" and movies such as the "Inside Job" have done a wonderful job documenting how Wall Street investment banks and regulators were to blame for our current financial problems and recent financial meltdown.

Additionally, we all have heard stories of mortgage brokers who unscrupulously encouraged homebuyers to borrow more money than they could afford. We also have heard stories of how appraisers worked in cahoots with mortgage lenders to ensure that high risk borrowers were able to obtain financing based simply upon the equity of the house. For some reason, however, we have heard very little about real estate agents that encouraged homebuyers to buy more expensive homes than they could afford.

A large majority of real estate agents are paid a commission based upon the price of the home their client purchases. If their client purchases a higher priced home they get paid more.

There is an inherent conflict of interest in this model. The agent's fiduciary obligation is to look out for the best interests of the buyer. In almost every case, it will be in the best interest of the buyer to pay less for a home. In contrast, it is in the best interest of their agent for the buyer to pay more for the home.

With this inherent conflict of interest as the backdrop, buyer agents were out in force encouraging homebuyers to purchase expensive homes during the housing bubble. They, like Ben Bernake, never pointed out the downside risk to their clients. They never warned their clients that if the bubble were to burst, they could suffer financial harm.

Had the majority of real estate agents not been paid based upon the price of the home and rather by some other measure, then it is possible that some of the damage could have been avoided. At the very least, real estate agents and the real estate brokerage industry may have been heeding warnings to the public rather than engaging in the same reckless behavior as the investment banks and others that created our current financial mess.

This is the sort of revolutionary thinking that happens at Flat Fee. By working on a non-commission based systemyou can be assured we will give you the best quality real estate work for a pre-discussed amount. If you have more questions about how Flat Fee works, or our business model, contact us here.

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.

Substance vs. Style

There was a day where a real estate agent would distinguish the quality of their services based upon their knowledge and experience in real estate transactions.

Today most agents no longer even attempt to distinguish their services upon substance. Instead they rely upon style to try to win over clients.

While there are many agents who do not fit the stereotype, I would venture to say that a majority of real estate agents fit the public's stereotypical image of one. It is a person in an expensive suit driving a luxury car with vanity plates that read "Realtr" or "Mony". It is a person with an enormous ego who brags about themselves. It is a person who is overly chatty. It is a person that acts like you are now their new best friend from the moment that they meet you.

Essentially real estate agent marketing has become much like a campaign for Prom King or Prom Queen. The agent is the "cool kid" who pretends to befriend the kids whom they believe are "less cool" just in order to win their vote. They pretend to provide real companionship and advice but the companionship and advice is hollow. It is intended simply to keep their vote until the Prom is over and once it is, they go back to being relative strangers.

The real question is: why do real estate agents feel the need to market their image rather than their knowledge, experience and quality of advice? The answer is simple, a vast majority of real estate agents have little substance beneath the style of their facade.

Instead of relying upon their own knowledge and experience, most real estate agents now rely upon computer programs, form documents and other professionals to provide the advice and counsel historically provided by agents. Here are some examples:

Price Analysis - In years past, agents used to pour over recent sales and comparable active listings to provide clients with advice regarding the estimated fair market value of a home. Instead of looking critically for themselves today, most agents now simply rely upon a computer to tell them the estimated fair market value. While this approach often results in faulty or unrealistic estimates, it is significantly quicker for an agent than pulling the data themselves and critically analyzing it.

Paperwork - Not too long ago, real estate agents had to generate their own paperwork for clients. As a result, they needed a keen understanding of the documents and their various provisions. Agents needed to explain the implication of each provision. Today, most agents simply utilize forms created by the Realtors Association or their office manager. Most have little to no understanding of the various provisions or the implication of those provisions for their clients. The forms are accessed via computer programs that simply require the agent to fill in the blank or check boxes. If pressed on all provisions in the documents, most agents cannot provide knowledgeable answers. Thus, the agent simply becomes a paper processor rather than an adviser to the client.

Knowledge About the Process - Most agents have never taken the time to learn how the process of buying and selling has developed over the years. Most agents today are simply provided a checklist by their office manager and go through the steps on their checklist. If a buyer or seller questions the agent about the history of the checklist item or why it is required most cannot answer. A perfect example of this in Vermont is when agents involved in the sale of a condominium unit request a copy of "Smoke Certificate". Had agents taken the time to understand and learn about the process, these agents would know that under Vermont law a "Smoke Certificate" it is not required for the sale of a condominium. Despite this fact, agents request it because it is on their checklist.

Advice of Other Professionals - Most agents today simply defer to answers and opinions provided by others during a transaction without ever asking critical questions of the professional that might benefit the client. For instance, almost every transaction involves a property inspection. Because of their cautious nature, most property inspectors will raise issues with the property. In many cases, the property inspector will make mistakes or improperly characterize an issue that causes a buyer to worry. Instead of questioning the inspector, most agents will simply take the inspector at his or her word. In some cases, this will lead to the buyer prematurely terminating the contract unnecessarily. At a minimum agents should be able to understand the advice being provided from other professionals and question the other professional if they believe the professional has made a mistake.

These are just a few of the many examples of why agents rely so heavily upon their style and not their substance. I believe it is time for the public to demand that agents start providing substance and do away with their phony stylistic facades. The agents of Flat Fee know the importance of substance. If you want an agent that will give you the information you need to make an informed decision, contact us .

"My Way or The Highway"

It always amazes me when someone says to me, "well, that is not the way we do it here." The implication, of course, is that their way is correct and my way is incorrect.

While I can respect a person who believes their method is the correct way, people who say, "well, that is not the way we do it here" typically do not respect any other point of view or methodology for doing something.They are basically saying, "it is my way or the highway."

If people never challenged conventional thinking or methodologies then there would never be any progress.It is important to always look to see if there are more efficient or effective methods for doing something.That is how progress occurs.

The real estate industry, more than most, seems to be filled with individuals who take the "my way or the highway approach.As a result, the industry seems to cater less to what the public wants and more to what they think is best.

If the "my way or the highway folks put aside their ego for a moment and listened to the public they would hear that some of the conventional thinking is outdated and that the public wants better methodologies implemented.Here are some examples:

1. Compensation - The public is tired of the 6% conventional compensation model. They think that real estate agents are overcompensated for the services provided. They believe that advances in technology should have led to a reduction in the conventional rate.The public wants the industry to develop a more equitable compensation model that rewards the services provided based upon the time spent by the agent providing advice, not based upon the ultimate sales price of the home.

2. Scheduling Appointments - Sellers do not want to receive calls from other real estate agents regarding scheduling showings of their homes. Sellers believe that one of the duties of their agent is to be an intermediary for them and to coordinate the scheduling of all showings.They believe agents who do not provide scheduling coordination are lazy.Despite this perception, firms continue utilizing this methodology.

3. Assisted Showings - Buyers that hire their own agent for buyer representation do not want seller agents present during a showing.When you speak to buyers after a showing where the seller's agent was present, an overwhelming majority say that the seller's agent made them feel uncomfortable.In thebuyers opinion, they hired their own agent so that they did not have to deal with the seller's agent. Again, the public believes that one of the roles of an agent is to be a true intermediary alleviating the need for them to work directly with the seller or the seller's agent.

4. Electronic Lockboxes - The public wants agents to utilize the most recent technology to ensure that access to their home is monitored to the best of the agent's ability.Many agents currently utilize electronic lockboxes which can only be opened by digitally encrypted keys.The keys and boxes create a permanent digital record so that the owner knows who accessed their home and when.Despite this technology being available, many agents in Vermont do not utilize it. In fact, because so many showings are done after regular business hours, many agents will leave the keys in an envelope at their office dropbox or at the property itself without ever seeing who is taking the keys.

5. Closing Coordinators - The public expects that if they are purchasing a property, their agent will be the primary contact throughout and that one of the duties of their agent will be to coordinate the closing.Instead of listening to the public, most firms have a "closing coordinator."These coordinators are typically salaried employees.In some cases they are paid per closing.In either event, if the firm did not utilize a third party closing coordinator then presumably they could charge the client less.Thus, not only does the public not want to have to communicate with a third party, but the methodology is inefficient from an economic standpoint as well.

6. Print Ads of Listings - The public does not want to see print ads of listings anymore. In our environmentally conscious society and given the fact that all buyers are looking online these days, the public views print ads of listings as a waste of paper and resources. The public would much prefer that firms utilize the internet and spend resources there rather than waste paper.

7. Pictures on Business Cards - Only would an industry run by "my way or the highway folks still believe that a picture on a business card is a good idea.I cannot think of any other industry where people still include a picture of themselves on their card.I don't think any business card designer today would suggest putting a picture on your card primarily because the public does not want to see pictures on business cards.

8. Luxury Cars and Vanity Plates - More than any other industry, in real estate there is a perceived need to drive the most expensive car possible.In many cases, agents cannot afford to drive a luxury car but do so anyway.The theory is that the public will equate an agent's track record for successful transactions with the type of car being driven.There also seems to be a theory that a vanity plate on the luxury car adds to that perception.In this day and age, the public does not want their agent to drive a car they cannot afford.The public wants agents to be themselves and drive the car that is right for them.The public is very good at picking up on facades and when they do the person putting up the facade loses credibility.

9.Buying Listings - There is a practice in the real estate industry known as "buying listings."This is the practice where an agent will tell a seller that their home is worth more than it is simply to secure the listing.The agent will overprice the home initially to get the listing and then when it does not sell, the agent convinces the seller to reduce the price.While this practice is unethical, it happens more than anyone likes to admit.The problem with the practice is that it not only does a disservice to the particular seller, it does a disservice to the public.It hampers the ability of the public to get a sense of the true market value of properties.

10.Commission Outside the Transaction - The real estate industry is peculiar in many ways, but one in particular is that its participants view their compensation as somehow distinct and separate from the transaction in which they participate.For instance, say that a buyer offers a seller $196,000 for their home. And let's say the seller won't sell for less than $198,000.Assume for a moment the seller's agent is the only agent involved in the transaction and stands to make a 6% commission should the parties come to an agreement and the sale occurs.Instead of reducing their commission from $11,760 to $9,760, the agent will risk losing the sale by telling the buyer they need to increase their offer to $198,000.If the buyer refuses, the agent will let the deal die rather than giving up $2,000.From the public's perspective the commission is integral to the transaction.It is the largest transactional fee to either side and it has the potential to bring deals together.

At Flat Fee, we do things differently. We work with you to meet your real estate needs. We want what's best for you. We're here to change the way people think of real estate. If you're ready for a forward thinking real estate company, contact us.

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.

The Pyramid Approach

A pyramid scheme is a business model that involves promising participants payment for enrolling other people into the scheme rather than really supplying any real value to the public. The business model is unsustainable and eventually collapses when the public realizes that they are not receiving any real value for the amount of money being paid. Pyramid schemes are a form of fraud.

While real estate agents do provide a service to the public, the business model employed by every larger real estate brokerage firm is akin to a pyramid scheme. Even though a service is provided, the scheme is built upon the overcharging for those services. Instead of charging the public a fair price, larger firms charge the public 5-6% of the sales price as a commission. Thus, there is no "real value" provided to the public and the overcharging of the public establishes the foundation of the scheme.

The next element of the pyramid scheme is to enroll participants into the scheme with promises of lucrative payments. Larger firms recruit as many people as they can as quickly as they can. In most cases, these firms will hire anybody that holds a license to sell real estate. These firms do not care about background, experience or qualifications. Their primary concern is to get bodies to help spread the scheme to a wider array of the public.

Like most pyramid schemes those at the top of the pyramid show their recruits just how successful they have been in selling the scheme to the public. They convince these recruits that they can be equally successful by first joining the scheme and then recruiting other agents to help grow the scheme.

The next element of the scheme is for the participants to convince the public that they will receive real value by hiring their firm. They often use their size, which is the very essence of the success of the scheme, as a selling point for their services. Larger firms will, without support, tell people that their size will help get their property sold faster or that they will be able to secure a better deal for their buyers.

The participants in the scheme will prey upon their social networks, friends and family to help perpetuate the scheme. They will use the trust established through their relationships to convince their social network, friends and family that they are receiving real value for the 5-6% commission. All the while these participants know that the services can be provided for less and in fact are provided for less by other firms.

Like every pyramid scheme the large firm real estate brokerage model is unsustainable and will eventually collapse. As the public becomes more knowledgeable about the true value of the services provided, the public will begin to question the participants in the scheme. As more and more people lose confidence in the participants in the scheme and less and less fall victim to the scheme, the dollars necessary to perpetuate the scheme will disappear. As with any other pyramid scheme, once the dollars dry up the pyramid will topple.

It is amazing that the pyramid has lasted as long as it has.

At Flat Fee, we don't believe in the Pyramid approach. We work with an honest business model to provide the best real estate services for both buyers and sellers. To learn more about Flat Fee, or to contact us, click 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.

Why Assisted Showings Can Hurt Sellers

Agents are constantly trying to justify their 6% commission model. One of the ways they do so is by telling sellers that they will attend showings of the property even if the buyer has their own agent. Agents convince sellers that their presence will help sell the home because they will be able to highlight the home's features better than the buyer's agent.

Unfortunately, assisted showings actually reduce a seller's chances of selling a home.

Buying a home is a very emotional experience. Buyers typically choose a home that provides them a positive visceral feeling during a showing. If the buyer feels comfortable and "at home" during a showing then they are much more likely to buy the home.

Buyers rarely feel comfortable when the seller's agent is hovering over them. Despite what seller's agents tell prospective clients, buyers do not appreciate a home more when the seller's agent highlights features of the home. Instead of appreciating those features of the home, the buyer feels like the seller's agent is giving them the "hard sell" like a used car salesman.

The buyer would prefer to be able to speak freely to their own agent about the home rather than having to temper their remarks and questions about the home because of the presence of the seller's agent. Because most buyers do not know which questions should be shared with the seller's side and which should not, they often forego asking questions that may have actually helped sell the home.

In most of the Country these days, selling agents can no longer convince their clients that assisted showings are beneficial. Selling agents have acquiesced into the use of lockboxes to allow buyer's agents to show property without the seller's agent being present. In my opinion this practice has helped greatly in making buyers more comfortable and sellers who do not utilize this practice are simply hurting their chances against sellers that do.

Flat Fee does things different. To learn more about Flat Fee's process, visit us here.

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