Archive for April, 2008

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Homes Comps: Determining Your Home’s Selling Price

Tuesday, April 29th, 2008

What are SOLD comps? Comps mean comparables. Comps are what agents and seller’s use to compare the selling prices of recently sold comparable properties in the surrounding areas. Real estate agents will use these recent sold comps to determine what to list a house for. Agents will do what is called a CMA-Cost Market Analysis. Agents typically do this in the beginning when meeting a seller. It may be part of their listing presentation to tell you what they think they house should be listed for before they would list the house on the MLS-Multiple Listing Service. In today’s market most lenders will ask for more recent comps (3 months or less), some will allow 6 months since last sold. Prior to 2007, lenders often allowed sold comps that were 1 years old. As the market has changed, most lenders have asked that sold comps be as recent as 3 months old or less. Some will allow for 1-2 that are up to 6 months old. Each lender will be different. Also in situations where lenders see that a seller is behind in payments and believe a foreclosure is coming up soon, they will order
3 BPO’s, from 3 different agent/brokers. BPO’s are Broker Price Opinions. These are more like CMA’s without the complete work of an appraisal. The reason is lenders probably want to save the money, plus they want 3 local agents to give their opinion, as the lenders are almost always from another state. Sold comps are best data to find out what your
house will probably sell for.

As a general rule the other properties has to be pretty close to the same house as yours. For example if you have a rambler, the appraiser or agent would compare other ramblers. They would try to stay within a few years of yours, same bedrooms, same garage stall, same square feet “above ground”. You can’t always find exact matches, so the appraiser or agent may make small adjustments to make a more fair comparison. The type of house, year built, condition, sq ft, and bedroom are going to be most of the most important things to compare fairly. Of course if the house is on the lake, you’d have to compare it against other similar lake homes in the area. Please don’t get caught up in the type of trim work, countertops, appliances, etc, that doesn’t make a very big difference when an appraiser or agent compares properties. Some properties just have better curb appeal and curb appeal is something just comes from experience. Curb appeal means it looks good from the street when you drive up to the property from the street, it obviously looks nicer than
the other house that has the same specs on paper. You can try to find sold comps online, but as an agent/broker, I really think the best data is from the MLS, and I would really leave it to an agent.

Typically a buyer is the one that’s going to order an appraisal, usually not the seller. The value of a property is what someone is willing to pay for the property. As of 2008, I would like to be more specific and say it’s what someone will pay, and what a lender’s appraisal review department is willing to accept for a value. A lender’s appraiser will come up with their own value. In markets where prices are going down, a lender typically will want to use more recent comps only 3 months old. If you need to find out your houses value, you can contact me, and I can have my agent associate run a CMA for you before they list your house. If we find out that you owe too much on your house, are behind on payments, we may have you talk to a short sale specialist. Please email me at ron@minnesotainvestors.com.

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Real Estate License Cost: Should I become a real estate agent?

Tuesday, April 29th, 2008

: ?

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One question I hear asked all of the time is should I become a real agent agent?, or not. Most people that ask this are investors, but not always. First I will say that becoming an agent is a lot of hard work, it’s not easy, big money like people make it sound. Yes there are $5000-$8000 checks, but please don’t underestimate how many months agents work for that, and how few buyer’s and seller’s don’t work out, or never make it to closing. Agents do a lot of work for free, and these are the reasons why it’s not a get rich quick. As a general rule agents who have been in the business a longer period of time will work more with seller’s and listing houses. Listing agents just find it to be a better use of their time. Some agents enjoy being both.
Some agents will work on filling up vacant houses, or work with buyers. Some agents will even do property management. What kind of commissions are made? As a general rule listing agents make 5-7% listing fees. In a competitive market it was getting down to 5%, on bigger houses it may also be lower. 7% use to be more in the days when houses were worth $100,000. A seller should not always go with the flat fee, or the cheaper listing agent. The reason is often the listing agent who charges a very low list fee could be hungry for business and that’s why his/her fee is so low. Sometimes the agent just wants listings for the marketing and has a great system in place and is able to compete better and does volume. Also with a flat fee just to get it on the MLS, please keep in mind that’s a lot of work that you have to do, that the agent wont’ do. An agent that does a full listing does a lot of work, a lot. Buyer’s agents back in the day use to drive buyer’s to 15-20 houses, that’s becoming more rare. The reason it’s much more rare is that 84-90% of buyer’s now start their home buying search on the internet, weeks or months ahead of time.

Typically an agent will set up a buyer on an email list for properties that match their criteria. Buyer’s review these listing results maybe daily, or weekly depending on how many fit their criteria. Buyer’s these days do more work up front looking at photos, property info, virtual tours, using mortgage calculators, etc. This means most buyers are a little more
qualified by the time they talk to an agent these days, but not always. Agents will hold their license under a broker, and pay either a desk fee and 100% commission, or pay less of a fee and get 70-80% of the commission. The broker has overhead like office expenses, desks, furniture, printers, fax machines, etc. to pay for. Agents will have to have a license for a minimum of 2 years before they can even take the test and go become a real estate broker. To get a real estate license, at the time of this writing you can probably do it for around $900. this includes about 3 full-time weeks of class which is about $275 per week, plus about $50 for each of about 2 books needed. You will receive the majority of the info in the first week. Get prepared to study and read. You will have to take a test and pass it before getting the license. At the time of this writing 70% score is needed on both the national and state portion of the test. The two objections I hear the
most from people of why not to get a license are these two: 1. You have to disclose you are an agent 2. You are held to a very high standard increasing liability.

These are both true statements, I have not found the disclosing of being an agent/broker a big deal. I don’t understand why that’s a big deal. As far as being held to a high standard, that’s fine also. Agents are suppose to be loyal, honest, ethical, and other stuff. Shouldn’t everyone hold themselves to those standards? If you do more than 5 transactions per year on your “own” transactions you are only allowed to do that if you pay and get a “limited broker’s license” or if you get a real estate license. A limited broker’s license doesn’t allow you to collect a “fee” on behalf of someone else. If you want to get a license, I say go ahead. It’s worth the real estate education, it’s a chance at some extra money, but it’s a job, it takes a lot of hard work. You will end up with 15 credits(14-15 hours) per year of continuing education that’s required as a real estate agent. The cost of 15 credits isn’t much, it’s probably about $200. Contact me anytime if you have questions ron@minnesotainvestors.com

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