The Elegant Augusta Real Estate Blog

Lydia Taylor April 21st, 2008

The Real Estate Industry has a pretty slimy reputation. And I’ll be the first to agree with that assessment- and you know what? I think a lot of professional real estate agents would agree! There are lots of reasons for this. For one thing, most states have very lax rules on who can be an agent, and the licensing exams are not that much of challenge. As a result, some real estate agents are less than qualified to actually hold a license and be trusted with six figure transactions. And since real estate agents work so closely with the mortgage and lending industry, both groups get tarred with the same dirty brush. Then there are the outside groups that come in the equation- companies and websites that try to supply buyers and sellers with worthless information and lousy marketing, and then sell their contact information to lead hungry agents that harass them at every turn. It’s no small wonder most people hate real estate agents. Professionals (and I’ll humbly put myself in this group) hate all this because we really try to do the best for our clients and hold their trust in the highest regard.

And with that introduction, I’d like to take a shot at airing out a little dirty laundry: how would you like to know what many real estate agents don’t want you to know?

1. Many real estate agents are part-time workers. Yes, lots of the people that actually hold a license have a second job since they don’t make very much money in real estate. They either are very poor at marketing (don’t list your home with these people), try to pick up a few extra bucks now again helping family members, are semi-retired or homemakers, or just have so little drive and ambition they never get anywhere. Do your homework- stick with a full-time agent who is fluent with contracts and negotiating techniques, is up-to-date with the current market trends, and has been successful marketing themselves and their listings. You deserve as much. As you are reading this, think about how many agents don’t even have a blog or a horn on the internet to promote your home (like this blog or my main website).
2. The majority of real estate agents don’t want you to know the business they’ve done. Why? Either they fall solidly in the first group, or they fall in a second category: about half the licensed agents in the US sell only 1 (or no) houses per year. Yes, you read that correctly. Many license holders handle less than 2 transactions per year. There is a good reason- many professions require or encourage you to get a license even if you don’t actually handle sales (like property management firms). Still, proof of business is one reason I show you my Recent Sales. I really almost have to, because usually I move my listings so quickly I look like I have nothing going on! Overall, something like half of all real estate agents wash out of the business in less than 3 years.
3. Many agents can’t handle routine paperwork correctly. Have you actually read, much less filled out, a Georgia Real Estate Sales Agreement? Well, of course you probably haven’t, and that is too bad, because they make great bedtime reading (sarcasm)! Boring or not, these are legally binding documents- it is critical that they be understood, and filled out correctly and precisely. I would run out of fingers and toes before I counted up how many times I’ve seen errors in contracts. I’ve no idea how some agents stay in business. Once again, try to stay with someone who has been around the block a few times. Chances are, they know the ins-and-outs of contract writing.
4. Home buyers can look at as many houses as they want to. Now why is this on the list? Because many unfortunates have been booted after looking at only 3 houses! A lot of old school agents used to have a rule: if a home buyer nixed the first 3 houses they were shown, the agent would give up on them, “A waste of time!” and move on to some other profit-generating activity. Strangely enough, this is often still the case- I hear buyers talk about it all the time. I’m not saying I’ll show you a hundred houses… After all, I’ve got tons of paperwork, marketing, and other activities to do, not to mention other buyers I need to show homes to as well! But, you deserve a fair look at the market, and you deserve to find the house of your dreams (if it’s out there). If you go out house-hunting, don’t see anything you like, and suddenly your agent plays hard-to-get, give me a call, please, because I value your business. Only once have I brought in another agent to help me with a buyer because they were too much of a strain on my time.
5. They don’t bother (or know how) to do a CMA (Comparative Market Analysis). A CMA is a critical part of the home buying or home selling process. In short a CMA is an analysis that takes into account recently sold prices for comparable properties in the immediate area of the home in question. For example, if you wish to purchase a 3-bedroom, 2-bath home listed for $150,000, your Realtor should perform a CMA on that home to see the prices other 3-bedroom homes in the area with similar amenities, square footage, and layout sold for. If other comparable homes in the immediate area are selling for an average of $135,000, your offer should reflect that! Likewise if you are listing a home for sale, the CMA will tell you the fair market value of the home so you can set your asking price correctly. If you have bought or sold a home before, did you get a CMA? I think many people will say “No” to that, because many real estate agents don’t bother to do it. Even I bought and sold two homes of my own (before I entered real estate as a career) and both times I did not know that I should have seen a CMA to inform myself as to real market values. Protect yourself: Make sure your agent does a CMA for you when considering buying or selling a home.

Well that’s about enough dirty laundry for one day. I’m not writing this to deter home buyers and sellers. Anything but! I am proud of what I do, I love my job, and want to leave the profession a better place. And there ARE lots of really good and professional Realtors out there. In fact, I am hoping a few of my pro Realtor friends will drop by and let us know more (good and bad) in the comment section. ‘Till next time, and keep yourself armed with information!

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Lydia Taylor January 28th, 2008

I have the privilege of having another guest correspondent on the Augusta Real Estate Blog today. Lauren Ferguson of Wells Fargo Mortgage sent in the following post about getting pre-approved for a home loan. Lauren and I work often together and I really enjoy working with her. If you need a mortgage specialist, I heartily recommend giving her a call.

Before beginning your home search with a Realtor, I highly recommend getting pre-approved for a loan first. It accomplishes two tasks: it outlines for you what price range you should be shopping in, and gets a jump start on the mortgage paperwork. The pre-approval process can be quite confusing for many people. Here is a simple outline of how the pre-approval process works from beginning to end.

There are several ways to getting pre-approved: from doing an internet application, communicating over the phone & fax, to a face to face interview. It is usually much easier to just give me a call and I’ll be happy to sit down with you. I prefer my clients to bring in their last two months bank statements (on all accounts), thirty days worth of paystubs, the last brokerage account statement (you receive this on a quarterly basis), and your previous two years W-2’s.

Those items are standard items you will need to obtain a mortgage, so right away you are ahead of the game by getting pre-approved. Please be aware your lender might require other documentation based on the loan program and your credit rating. Allowing your lender to review your documents prior to searching for a home saves lots of headache down the road. Many people have debt ratios very close to guidelines, and a few dollars can make them not qualified for the loan. As Lydia pointed out in a recent blog post, the new Georgia real estate contract makes it very important that you are able to secure a timely loan once making an offer on a home. Getting pre-approved helps get the ball rolling so that when you need to get the financing, your mortgage broker already has most of what they need to secure the loan.

After you receive your pre-approval letter, and the lender has an opportunity to review your standard documents, the lender may require additional information to secure the loan. In some cases underwriters may call for more documentation during the process, but it is nothing to be alarmed about. Your pre-approval letter tells you exactly how much you are qualified for- that way your Realtor can show you homes you can comfortably afford.

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Lauren Ferguson grew up in Jonesboro, Georgia where she graduated with honors from Jonesboro High School. After graduating she attended Presbyterian College on an academic and tennis scholarship. In 2004, she graduated with a bachelors degree in sociology and mathematics. During her time at PC, she was a member of countless clubs and served as captain of the women’s tennis team. After graduating from college Lauren accepted a position with Wachovia Bank as a financial specialist. All the wonderful experience and training at Wachovia allowed her to move to Wells Fargo Mortgage to specialize in doing home loans. Lauren is currently involved in the Red Wagon Society, Augusta Business Development, Mortgage Bankers, and is an active member of Trinity on the Hill.

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Lydia Taylor January 21st, 2008

News Flash: Georgia decided to change the Purchase and Sell Contract, effective January 1st, 2008…

As a Realtor, I see changes to forms often and it is usually nothing to alert the public on, because they have changed wording or a blank has moved. However recent changes by the State of Georgia to real estate contracts have a significant effect on both sellers and buyers. Some of the old standards of what closing costs can be paid by the seller and buyer have changed, as well as inspection, mortgage, and appraisal contingencies.

Closing costs in the old contract were pretty generically handled and even if the buyer did not request closing costs, the seller still had to pay for the deed transfer tax. That is no longer true. Now the buyer pays the deed transfer tax! The new contract states exactly what costs the buyer has to pay, and even when closing costs are requested from the seller, it is very specific as to what items the seller can contribute funds to. Under the old contract, buyers could request an amount from the seller to cover closing costs. That money was applied to pretty much anything that dealt with closing, including but not limited to: lawyer fees, taxes, pre-paids, escrow establishment charges, surveys, and insurance. The new contract is much more specific as to what costs it will allow that money to be used for. Any money left over, not used for the specific items in the list, remains with the seller. So gone are the days that the buyer can foist all closing costs on to the seller. Granted all things are negotiable, however it will take a savvy Realtor to point that out and make it a part of the offer from the very beginning.

Contingencies for inspections, mortgages, and appraisals are a little different then they used to be. In the old version of the contract, everything was included and they all could have different deadlines for completion. Now there is only one time limit for all activities, and that time period is for the property to meet the appraisal price, undergo inspection, and for the buyer to complete the mortgage activities. All these things must get completed in what is termed ‘the due diligence period’.

What this means for home buyers:

The bank has to get the appraisals done sooner. Which is nice! (Reputable and good mortgage lenders tend to do this in a timely fashion, however fly-by-night mortgage companies always wait until the last minute, which holds up closing. They can no longer get away with that stunt.) The appraisal contingency is now in a separate addendum that has to be added to the contract. Also, during the due diligence period if a buyer wants to get an inspection and negotiate repairs, this has to be done within the the specified period of time and there is a separate addendum for that. There will be some closing costs you simply cannot avoid. Lastly, buyers must get their financing in order before the due diligence period runs out. If they find out that they cannot meet the requirements (inspection, appraisal, or mortgage) to purchase the home, they can walk away during the due diligence period. That’s a good thing. However, if they discover that they cannot meet the requirements to purchase the home after the due diligence period has elapsed, then they lose their earnest money to the seller!

What this means for sellers:

When the home is under contract, the home will no longer be listed as pending until after the due diligence period has expired. That time is now termed as an ‘active contingency period’. The house is not technically off the market. You can’t walk away because someone else has made a better offer, however if the buyer does walk away then your house has not lost marketing time being a pending sale. One of the biggest pitfalls for sellers is that buyers now have an open pass to walk away from the deal during the due diligence period. Also, because so much has to be accomplished during that time period, the typical 10 days will now increase to 15-25 days for the due diligence period. The good news is that buyers have a set period to get their financing in order, and a severe penalty in your favor if they don’t. Lastly, you are protected from a portion of the closing costs.

My take:

The goal of the State of Georgia was to streamline the process and help everyone to be better protected in the process of purchasing a home. I have already worked with the new contract and I think they took some steps in the right direction. I think once everyone becomes acclimated to it the new contract will create better, cleaner deals, hopefully take out some classic Realtor mistakes, and help all of our buyers and sellers in the purchases and sales of their homes.

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Lydia Taylor December 28th, 2007

The debate rages on…

There are a lot of people out there that believe that Realtor fees are outrageous and Realtors are way overpaid. That is a debate that has gone on for a long time, and I won’t address it here.

What I will address is the misconception that an agent walks away with huge commissions for a house sale. In most cases, it’s patently untrue, and stems from most people not realizing the number of parties involved and the expenses behind the scenes.

Let’s discuss the payment that Realtors receive when handling a real estate transaction. First of all, the payment is normally handled by the seller. That means if you use a Realtor to buy a house, their fees are not coming out of your pocket. Sure, the fees might be built into the ‘overhead’ of the house price, but all the same, as a buyer you won’t see the cost. As I just mentioned, the fees are paid by the seller at the house closing. It is taken out of the equity (if there is any) of the house before the seller gets their check. That means if the transaction falls through (for whatever reason), neither Realtor gets paid. Realtors fees vary from Brokerage to Brokerage - For example Meybohm Realtors fees are different than Re/Max which is different than Keller-Williams.

Let the Splitting begin…

I’ll walk you through an example of a typical fee split. In a typical sale, there are four parties that split the Realtor’s fees:

1. The seller’s agent’s Brokerage
2. The Seller’s Agent
3. The Buyer’s agent’s Brokerage.
4. The Buyer’s Agent

In my case, I work through Meybohm Realtors. They charge 7% for a residential property transaction. Last year the average cost of a home in the Augusta area was approximately $155,000.

7% of that average sale price amounts to $10,850. That’s a high number, but remember we have a 4-way split to follow. The first split is between the selling parties and the buyers parties, so normally each side cuts the number 50/50:

To seller’s agent and broker: $5,425, and then to buyer’s agent and broker: $5,425.

This money goes to the managing broker on both sides, who takes their cut and gives the remainder to the agents. In my case, Meybohm takes 50%, leaving me with $2,712.50. Once again, this varies depending upon brokerage, but even if the agent’s broker takes nothing, leaving the agent with a 100% commission (well 100% of the remaining 50%), they are certainly paying office dues that run around $1,500 a month in addition to their other expenses.

That’s probably the #1 reason people think huge commissions are the norm in real estate. They see a $150K house, they see a 7% commission…Do some quick math…and jump to the conclusion someone just made 10 grand. Wrong.

Uh-oh. Now the fixed expenses kick in…

But wait- there’s more. A real estate agent works as an independent contractor in the eyes of the IRS. The taxes start at 40%, leaving me with $1,627.50. I can get write-offs for certain business expenses, but I’m still going to get hit to the tune of a third or better. (If your CPA is much more ‘creative’ than mine, tell him to call me when he gets out of jail.)

Then you take out an additional 10% for state taxes. I’m down again to $1356.25.

Now, we get to fixed costs: Agency dues (over $300/year), hosting fees ($360/year), IDX/MLS feeds ($200/year), marketing (I average $2400/year), increased automobile insurance (carrying clients requires additional coverage), continuing education required to maintain your license ($300/year), and a cell phone ($200/month). Website development and tweaks I set aside $50/month. Then you have your lockboxes, yard signs, and electronic keys. The key access has a monthly fee of $40/month. In addition, I figure I consume about $200 in business supplies per year.

Then I have the wear and tear on my car and the gas driving people around. I conservatively estimate that at about $200 a month.

My fixed costs alone exceed $600 per MONTH. If this theoretical house sale is my only sale for the month, I’ve made just $752.92.

And the results are in…

Now I’ve shared my split with you before and after taxes, and shared some of my fixed expenses. I’m sure some of you have already computed that if I only sold (1) $150,00 house per month my net income would be approximately $9,035 a year. Now consider that the average agent in Augusta has one transaction every THREE months. That is why there are so many part-time agents! It’s very difficult to get enough business to make it a primary career.

My first year start up expenses, including website, etc were over $7,500. Most established agents will tell you not to count on any income at all for the first 2-3 years.

Typically it takes a minimum of 30-60 days of work for a sale, and then you get your check. This means that unless you have a working spouse, or carry some capital in your checking account, you are always floating expenses before you realize the income. Believe it or not most agents work pretty hard for the wages that they make.

Being in business for yourself requires an extraordinary amount of work and the weekend is the busiest time, since everyone else is NOT working. I get calls late at night pretty much every day. And you should try planning a vacation!

I’m not looking for a pity party. In fact, I do pretty well in real estate, and I conservatively expect my business to double in ‘08. But it always makes me grimace when people make jokes about the high commissions. Since when?!? (LOL)

Don’t get me wrong - I love the work - but if you think money is the only reason why Real Estate professionals do the job then you would be mistaken. Because at the end of the day the money is not enough. If you do not enjoy people, homes, and a lot of hard work, you need to find another career.

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Lydia Taylor November 20th, 2007

For the real estate professional, one of the biggest tasks in taking on a home listing is marketing the home. Some agents are more savvy than others, some agents invest more in marketing materials, and some agents (many actually) don’t do anything but list the home in the local MLS and stick a sign in the yard. Or maybe they just do the sign.

The primary way most agents can market your home is to publish your home listing in an MLS or Multiple Listing System. This a system used by Realtors to collate and share data with each other on the real estate market. Not just homes appear there- most MLS systems also have information on commercial real estate, and land & lots for sale.

For home sellers, the primary thing that your listing agent should do is list your home in the appropriate MLS system. For most of the service area of this website, that system is the GAAR-MLS, or Greater Augusta Area Realtors - Multiple Listing System. There is a local exception- nearby Aiken SC has a standalone MLS system. However, the Aiken area is also covered by the GAAR-MLS. This leads to an overlap where a home for sale in that area could be found in one or both Listing Systems. That leads to the first error in my list of stupid Realtor tricks:

Stupid Trick #1: List a home in the wrong MLS

I’ve run across homes listed in MLS systems that were physically located well outside of the actual intended coverage area of the MLS. The listing agent does bear responsibility to list the home with the proper Listing System, but it still occurs sometimes. Usually the cause is that someone has decided to use an out-of-area agent to market their home. That listing agent may not be a member of the local MLS, and therefore unable to list homes on the local board. Instead they just use the only MLS they have access to, which may be geographically far away from the listing. They could ask another agent in the locality to co-list, so the other agent can enter the home in the local MLS, but then they would have to split the commission. Why do that?

This condition causes those homes to get much less exposure to local buyers agents, as those Realtors in the area often don’t realize the home is even on the market. Situations like that can be very unfortunate for the property owner.

As I mentioned earlier, the Augusta area has two MLS boards that overlap. If you have a home that is located inside of Aiken or near the outskirts of Aiken, make sure you ask your Realtor which system they are using to market your home. It is possible they can market your home in either system, or both.

Stupid Trick #2: Don’t list a home on a MLS at all

Unfortunately many homes can be found where the listing agents don’t even bother to list the home in the MLS at all. They save money that way- the fees for accessing a MLS system to list houses typically are very expensive. Part-time agents, small brokerages, and just plain cheap-skates often fall in this category. Of course, if you are listing a home with someone in this group, you are rarely aware of that. If you haven’t prepared for extended holding costs due to dramatically lower exposure of the home to potential buyers, you may be in for a shock. I like think of it as the FSBO effect (For Sale by Owner homes are rarely marketed through a MLS).

Stupid Trick #3: Is your home actually marketed through a MLS?

Don’t take the listing agents word about the home being shown in a MLS either. I ran across one home seller who thought their home was marketed in the Augusta MLS. They found out otherwise after they fired their first listing agent and entered a listing agreement with another agent. All of a sudden they saw their home everywhere online! Trust, but verify: Ask your listing agent to send you a printout of the MLS entry. Verify the listing details and that it is indeed published in a MLS System backed by a Board of Realtors. Make sure what they give you is a legitimate MLS listing sheet located in the proper area (not just Zillow.com or some such).

There are two more tricks I’d like to share with you. One may affect you as a home seller, the other is just shady black-hat stuff that some real estate agents have been known to try.

Stupid Trick #4: Isolate your listing data in a black hole.

When a Realtor enters a listing in a MLS system, they can choose to ‘push’ the listing to extra-party ‘feeds’; OR they can hold the listing in such a way that it can only be seen through the main site- the one used by Realtors only. What does that mean? If they put a hold on the listing, it means that websites like mine and others that offer their visitors home search will NOT have any data on that home.

My site ‘pulls’ all current listings from the GAAR-MLS every night. Other sites, such as my brokerage’s website MeybohmRealtors.com, or the newspaper’s website at AugustaRealEstate.com, do the same thing. If a home is restricted from the feed, it won’t show up on those websites or any other second-party website. It will only show up on the official MLS board’s website.

Why would a listing agent do that? I dunno! I figure the more the merrier, so if those other sites want to help show off my listing, that’s great!

Other agents and brokers may not agree- they want to market the listing exclusively. It’s quite common to find homes listed only on the official MLS board that won’t be seen anywhere else.

Stupid Trick #5: Continually relist the home to hide the past.

Whats that ‘black hat’ trick? Well, that one is old as the hills, and happens throughout the United States. Lets say you list your home with a high initial asking price. After a month of no showings, you are starting to get frustrated. Thats when your listing agent suggests lowering the price, so naturally you go along with their advice. They could just change the price on the listing, but they don’t. What they actually do is pull the home off of whatever MLS they may be using, then create a new listing for the home at the lower price. Then the agent ‘relists’ the home. This starts the clock all over, and it appears that the home is newly listed due to the last listing date.

An agent doing this could claim a lower time-on-the-market before sell, or that they had x # of home listings in the last year, etc. There are other agents that play a variant on this game where they change the wording on the description or fix a miss-spelled word, doing whatever it takes for an excuse to re-list. Some agents will do this 4-5 times per home listing. MLS boards are starting to crack down on this, but it still happens, and in some cases state or local legislation has been proposed to deal with the problem.

One of the funniest instances of this that I personally encountered is where an agent sent a mailing of glossy postcards to all the addresses in my neighborhood. On it, they claimed that they had sold a nearby home less than 12 days after receiving the listing! The real story was that they had relisted the home multiple times- in fact the home had been on the market for many weeks. Every homeowner in the neighborhood knew that. But, the home had indeed sold only 12 days after the last re-list.

Final Thoughts:

All these stories are examples of Caveat venditor - which is Latin for ‘Let the seller beware’. When you are listing your home for sale, please, please, PLEASE interview your agent.

I have a few suggested questions for that interview: Are you listing my home in the local MLS system? Are there multiple MLS systems covering the area where my home is located? Will you use more than one to gain maximum exposure for my home? Will my listing be available online through extra-party websites? Will you practice honesty when handling my listing data, and will you use that data in self-promotional material later?

Don’t get Discouraged!

I don’t want to leave you with an impression that every listing agent is out to con you. Nothing could be farther from the truth. The majority are hard working and ethical. However it always helps to arm yourself with knowledge in every endeavor.

Lastly I wish you good luck selling your home! If you happen have a house in the Augusta area and need advice, have questions, or need a listing agent, feel free to give me a call. I’d love to list your home!

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Lydia Taylor October 1st, 2007

In my effort to provide the top website in Augusta for real estate services, I’ve never stopped trying to improve. I’ve been frequently updating the real estate content and information, with the aim of improving the usefulness of the site itself; and working on the ‘back-end’, to provide more functionality for my clients.

After all I don’t call the website Elegant Augusta Real Estate because I sell high-end homes, I call it Elegant because I provide the best service. Whether I am helping you with a $50,000 transaction or a $500,000 transaction, my desire is to provide you with the absolute highest quality real estate representation in Augusta.

That motivation applies to my online home as well, and we implemented a major update to NorthoftheSavannah.com recently. As many of our registered users found out over the weekend, the website now sends new listing updates to saved searches by email. Lets say you have a saved search titled, “Evans GA real estate between $200 - $250 with 5 bedrooms” with those particular features included in your search criteria.

Once your search is saved on NorthoftheSavannah.com, every day that new listings fitting your search criteria are posted on the GAAR-MLS, you will be sent an email with information on the new homes. The email includes a photo and a quick summary on each of the newly listed houses fitting your search. When the best homes in the area come up for sale, you can be right there to move quickly! How awesome is that?!?

You will only be sent one email per day, unless of course you have multiple searches saved on the site and more than one search has new listings. If there are no new listings, you will not get an email.

Each of the new listings will have a MLS # heading. That number will be clickable and take you straight to the home details here at the website. And of course, at the bottom of the email is a clearly visible ‘unsubscribe’ link. The important thing is that you leave an email address you check frequently so you can receive the listing updates!

I hope that you will find this new feature useful. The competition doesn’t sit still and I don’t either. Continuous improvement is what it’s all about and I want to do the best I can do for my clients.

I hope you enjoy the website, and if you have any questions, please give me a call anytime!

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