Sitting down to write a list post, I hate lists posts… because list posts are a little deceitful and created solely for SEO reasons… I don’t know much about that, But I have a feeling I can share this with you… It’s a mash-up of Q & A’s. Some of these you may already know, and hopefully some of this will be new. Ok, take a deep breath… Here goes…
1. Will rents continue rising? Yes… Since the housing crisis began in 2008, about 4.6 million homes were lost to foreclosure, according to CoreLogic. The majority of those homeowners became renters putting strain on the rental market. Rents will always continue to rise because of inflation. And, of course with new lending requirements and student loans to pay off it will take longer for young people to save the required down payment. Good rentals, good property managers, and good landlords will be in demand for at least the next 15 years.
2. What type of rental is best for investment? Depends on the situation, but for most of us it’s your standard single family home. People who previously owned homes prefer to rent actual homes not apartments. There’s a sense of privacy, independence and feeling of being grown up when you have you an actual house to call home. Apartments are cool when you first move out of mom and dad’s house, but they can become old real quick, saying this doesn’t mean homeownership is right for everyone.
Another reason a single family home makes a good investment is the price is much less than larger multifamily units, in fact the rate of return on a single family home could be 10 times that of bigger more expensive multi-family units… real estate was once about location, location, location… Today it’s about cash flow, cash flow, cash flow…. if it doesn’t do that, it doesn’t make sense.
3. What is a Transaction Broker? Some states including Florida have agents work as transaction brokers. The easiest way to describe this is a Transaction Broker crafts a transaction by bringing a willing buyer and a willing seller together and assists with the closing of details.
The Transaction Broker is not a fiduciary of any party, but must abide by law as well as professional and ethical standards. Now, if you ask your Florida real estate agent “How much should I offer?” Technically your agent can’t tell you what to offer and will probably respond with something like this… “A full price offer is always a good offer.” But, a good real estate agent would say “I can show you what other homes in the area have sold for to help you make an educated offer.” …Isn’t that a lot better for the customer? … Real Estate is a high trust business and as cliché as it sounds it’s the largest purchase most people make in their lifetime, be helpful… educate… because…
4. Are you good at sales? Customers don’t want to be sold! The days of manipulative high pressure sales techniques to get someone to sign a contract are over. Customers demand that they be given enough information to decide whether they want to buy. Being a real estate agent is technically defined as a sales job, but most sales people suck at selling real estate… and, if this wasn’t true you’d see every furniture and used car sales rep succeeding at selling homes.
5. Do you own what’s under your home? Did you know some of the nation’s largest home builders sold homes and retained the mineral rights underneath the home for themselves? …Unfortunately, most of those homeowners are clueless too. Eight words buried in the second page of the title or deed to your home could make all the difference … This raises the question when buying from a builder, is it smart to use the builders lender, the builders title or closing company, and the builders real estate agent? …If all the people involved in the transaction work for the builder who would warn you?
6. Will rising interest rates hold people back from owning a home? Forget about interest rates. Interest rates will continue to rise, but this will never deter a motivated buyer. Yes, higher interest rates will play a role in your buying decision because you’ll decide to either buy a smaller home in the neighborhood you want or perhaps consider a different area to have the size home you want.
7. Shadow inventory, truth or fiction? There may not be a ton of REOs being publicly advertised in some communities at the moment, but the number of delinquent home loans and foreclosures in the pipeline is huge.
Now, re-defaults on loan modifications are beginning to pick up steam, jumping 25% and with as much as 40% of subprime loans going back into foreclosure over the next 12 months. And, there’s also all the homeowners that pulled equity lines of credit during 2008 to keep themselves afloat….
There are also zombie homes and vampire homes, homes are still sitting limbo after several years of non-payment with the owners living in them. Some owners have physically walked away, and others have continued to stay without paying a payment for years. Maybe Florida is different from other parts of the country.
8. Who determines the price of a foreclosed property? In Florida it’s common for banks to hire real estate brokers to do what’s called a broker price opinion (BPO) to decide the listing price. Once the foreclosed home hits the market for sale, at a price that’s usually only a small percentage below retail price, offers come pouring in.
9. Foreclosure homes, are they a good deal? Some foreclosure homes I’ve attempted to buy will have 30 offers by the end of the first day… After all the bidding up of the home and costs of repairs that the home needs done, the home may not be worth the time or money you put into it… if you’re purchasing to fix up and re-sell it. If you’re buying to hold long-term or as a primary home, disregard that statement.
10. Are Commissions always negotiable? There’s no set fee real estate agents charge. But, almost all Real estate agents receive pay based on results… if the house doesn’t sell, the agent doesn’t get paid.
Yes, some agents might charge a marketing fee up front… or work on a flat fee basis where the seller will pay a flat fee to list the house up front regardless of the house selling or not selling.
A person selling their home can realistically save thousands of dollars by listing their home flat fee style. I have a feeling with the internet and tech savvy customers that flat fee or flat rate mls services will be the new normal in real estate.
11. Why do so many real estate agents get burned out? Any sales career, including real estate tends to attract workaholic, self-motivated, and highly driven individuals… these people would be working overtime no matter what line of work they are in.
Of course every agent is not like this. There is a large percentage of real estate agents that enjoy doing a few deals per year. This type of agent doesn’t want a magnetic sign on their car saying they’re a real estate agent. The extra income and flexible schedule is what keeps them enthused about their real estate business.
People are funny creatures, when something doesn’t work the way it should or have the results they expected they’ll throw more money,time, or energy at the problem to solve it, and that almost always makes the it worse. Real estate agents are people who suffer from this same problem. When deals are not happening they put more money, time, and energy into it… burning themselves out, alienating their loved ones, missing out on the freedom of this business. Finally losing the excitement and joy they once had for this profession, they become burned out.
12. Do outgoing people make better real estate agents? Short answer… No, see #4 above. You’ve seen real estate agents in movies and television shows portrayed as over-confident, smooth talking, and even aggressive but this is far from the truth. A good real estate agent is one that displays patience and an eagerness to listen. Why? …Just like your grandmother may have taught you, you have two ears and one mouth for a reason… Listen twice as much as you talk.
Selling real estate isn’t about pitching a new unheard of product, everybody knows what a home is and they’ve thought about their home more than any real estate agent ever will, and this is why listening is important because every home buyer already knows what they’re looking for.
Here is a funny YouTube clip of a pushy real estate agent.
13. Granite counter tops & stainless steel appliances are over-rated. It’s better to find a home with the right amount of bathrooms or in the neighborhood you want because painting, installing granite countertops and upgrading appliances is easier than having an extra bedroom or bathroom attached to the home… or commuting an extra 29 minutes each day. Would you agree?
14. How many real estate agents are there? Florida has the most practicing real estate agents in the country: 26,000, nearly as many as California and New York together, according to Bureau of Labor Statistics data from 2012.
Now, in 2014 Florida has between 3,000 and 3,200 newly licensed agents per month… That’s a huge increase… But, are they really competition or will they quit like 70 to 90% of agents do within the first year. ( See #16 Below)
You’re thinking “Well, if there are so many agents, maybe the tests are too easy?” Jokingly, I would agree the test is easy because I passed on my first attempt; yes I studied my butt off… and took it very seriously because it is a big deal for me.
15. Was the Florida real estate license test easy? …No, in fact the instructors claim Florida has the second most difficult licensing test in the country and only 37 percent pass the Florida Real Estate Agent test. If you’re planning on taking the test, you’ll need to study your butt off and find a really good real estate school to attend, skip doing it online… that’s for the birds. Spend the money to attend an actual real estate school, it will make a huge difference.
On a sidenote here… I feel the real estate agent test doesn’t teach you how to be an agent… it’s focus is more on compliance with laws, math formulas you’ll never use because mortgage brokers do that for you, and a whole bunch of stuff about deed restriction and taking title to a property which again, as an agent you’ll never use because closing and title companies handle all that stuff.
There are a lot of people involved in every transaction, the agents role is like a matchmaker… introduce people who have something in common, she wants to sell… he wants to buy. Keep it simple.
16. Is being a real estate agent hard? It depends heavily on your mindset, expectations going in, and pre-planning. You can ask two guys digging a hole in the ground what they’re doing and one might say something like “I’m working, digging this hole.”… The other guy will say …“I’m helping this family build a pool that they can enjoy for many years.”… See the difference?
Looking at the big picture, the lasting effects of what you can do in the business of real estate will bring overwhelming joy… There’s nothing like the feeling of owning your first home, and first cash flowing investment property… The only way to feel that again is to help someone else find there’s. And, when you help a customer invest in real estate the right way… you change their family history for generations to come.
17. Is the real estate business expensive? The freedom that comes with working for yourself is priceless, but this freedom is expensive. Real estate schools won’t talk about this, and most brokerages won’t talk about it at first either… nobody wants to scare a new recruit away. After all, once you have a real estate license every real estate brokerage in town wants to hire you because you work for free… until you sell something.
Yes, it becomes expensive when adding up state, local, and national membership dues to be a Realtor Member — which is above and beyond being a real estate agent, it’s a trade association — you pretty much have to be a member. There are a few non-member real estate agents and brokers, but we won’t dig into that now.
There are also multiple listing service fee’s to advertise properties for other agents and the public. Electronic lock box expenses, marketing and advertising costs… Vehicle expenses, taxes, websites, business cards, internet connections and all your basic business expenses… maybe you want to argue that most of these are tax-deductible? Sure, maybe… but it’s all money out-of-pocket if you ask me.
And, the biggest cost of all is the commission split a real estate agent has with his or her brokerage. The split can be as much as 50% of a real estate agents commission before any expenses and taxes taken out.
I’m ending this post on that note. If you have any questions that you’d like answered leave it in a comment below.
P.S. …If this post was helpful to you at all… send it to a friend.