Elan Chertock\’s Blog

This may seem like an obvious answer, wouldn™t it be $100,000?

The answer is no, in actuality it™s quite a bit less than that.   When our market was hot, people liked to believe that if they bought a house for $400,000 and the value went up to $500,000 than they made $100,000.   The industry supported that belief to create more transactions, but it™s really important to understand the economics of real estate before you count that $100,000 value as money in the bank.

First, when you initially buy a property, you pay a lot of money just to acquire it, which are all sunk costs.   Then to sell the property you have many more costs just to dispose of it, including agent™s fees, house preparation, transfer taxes, and many more in closing costs.   So if that house went from $400,000-$500,000 in value, you did gain equity, but NOT $100,000.   Also, that equity is only real if you are cashing in as we have seen many properties go up $100,000 a few years ago, just to go back down in more recent years.

I do encourage home ownership for the many great things that go with it including the long term financial gains, but I strongly encourage everyone to look at the real numbers of how much it costs to acquire property and how much it costs to sell property, and then subtract those amounts from any potential gains in equity.

I guess this is the big question since some of the companies who market to me, a real estate broker, keep insisting that if I use that as my catch phrase, along with the thousands of other agents they are convincing too, clients will flock to me.   I can’t even count the number of sales people who have tried to convince me that if I use that phrase on Craig’s List postings and other ads, I will get many interested clients since they think I will be able to answer that question.   Of course they are trying to make money, what they are selling to agents is a customized web page that seems like it would answer that question with some data.  The  truth is, it’s no better than the  data you can get from some of the great web sites that are free, such as Trulia, Zillow, Cyber Homes, and others and in my opinion not even as good.   Basically what they are trying to convince agents to do is direct clients to data (which is great, but they charge for this data which is free if you look elsewhere) and then claim to answer the question, “has the real estate market stabilized”.

 Well, I will answer that question straight, without paying a 3rd party or simply directing you to data.

 I DON’T KNOW!  

Sure, I can tell you what happened in any area from anytime in history up to today (it may not be in my head, but I an quickly look it up), but really no one can tell us the exact future.   In the name of self marketing, I’m not going to tell you what you want to hear since I’ll feel bad if I’m wrong.   I don’t want you to buy a house with me today, just for you to tell me in two years from now you lost equity and it was all based on me being able to tell the future.   None of us really know where the market is going.   In the long run it will go up since it ALWAYS does, but in the shorter term there could still be major dips.

The answer is YES, with Elan Home Brokerage, but generally NO.   It really depends on how the brokerage is creating the rebate.   Some discounters are able to have enough funds to rebate buyers by cutting down on service and thus allowing agents to be over loaded with clients.   There are many things that can come up in a transaction where  the financial implications of a “hands-off” approach can over shadow any rebate you may get.      If your agent was too  busy with other clients  to actually be there in person at the property to know exactly what was going on and then negotiate on your behalf, you may be getting a $5000 rebate but inheriting a $50,000 problem that could have been avoided if your agent was more present.

At Elan Home Brokerage your rebate comes from us eliminating the middle man.   Most agents pay their brokers a huge cut of the commission, usually around 40%, plus they charge them monthly fees.   With this traditional set-up, it’s almost impossible to rebate clients at all, especially half the commission.   At Elan Home Brokerage, instead of splitting the commission between several parties, we split it with our buyers.   We also keep our marketing costs extremely low, we figure the more the word gets out about our FULL level service with a 50% rebate, the less we need to pay out in marketing costs.

See us at www.elanhomebrokerage.com

At what point are you 100% sure a transaction will close?   The answer is, when it closes.   I always believe it’s best practice to use buyer credits in a transaction instead of actually fixing items once in contract.   This is true for several reasons, but one is that   you won’t know 100% that it will ever close until it closes.    There could be something unexpected that comes up the last day of the escrow that could prevent it from closing; maybe the buyers decide to break up (I’ve seen it), maybe the seller has judgement liens against him or her which makes them short of funds  to close.  

The seller may prefer to do the work as opposed to granting a credit, thinking they can do it cheaper, but who’s going to guarantee the work?   If they hire a contractor to do the work and make arrangements to pay them in escrow, the contractor will be just one more frustrated person pushing for a close and will be calling you, the agent, to check on status, and if it never closes they may never get paid.

The point is, to avoid grey areas of how something should be fixed, angry contractors, and frustrated sellers who may have paid out of pocket to fix items requested by the buyers just to have them fall out of contract, try to deal in buyer credits to remedy such situations as much as possible.   And remember, the transaction is not finished until the fat lady sings.

Welcome to Elan Chertock’s Blog! This blog will provide you with valuable information, tips, and general insight into the real estate market in Alameda. Visit my website at http://ElanChertock.featuredwebsite.com.