Chris LaGarde, the Home Buyer Specialist for Chester County, gives you 5 tips to help you determine the best budget when looking for a home.
Home Buyer Advice: What can I afford? Comments Off
The Commission Conflict. . . Comments Off
I recently commented on a blog when someone said that one shouldn’t have a real estate agent represent them in the purchase of their home because they are paid by commission. When I read that. . . well I’ll be honest, I was mad! The reason I was mad is because after all the splits (Team, broker, government, etc) the difference in commisison between a $200k sale and a $250k sale is very small.
So, I wrote to explain what exactly that difference is. I hope it makes some sense. . .
First – there are agents out there that are unscrupulous and will not look out for the best interest of their clients. That is why a good referral from a trusted friend is like gold.
Second – My Commission is split a handful of times, and after those splits, $50,000 in price makes little difference. . .
As a buyers agent, the average commission in the area I live in (Downingtown, Chester County, PA) is about 2.7% of the sales price. The average price of the homes I sell are about $250,000, so on average my gross commission is about $6750. Sounds good right – Not so fast. . .
When I receive a commission from a client purchasing a home, it is split among 4 parties. First, it is split 50/50 between me and the team I am on. Their 50% goes towards marketing and profit for the team. Now my commission is $3,375.
It is then split 65/35 between me and the brokerage I work for. Their 35% goes towards their costs and the profit sharing Keller Williams does (Unique in the real estate world by the way). So now my commission is down to $2193.75.
THEN – because I am self employed, I have to set aside another 30% for the Government.
BOTTOM LINE – My commission is ONLY $1535. That is a little more than a Half percent.
At that level, most clients have a very tight price range they are looking in, usually a $25k price difference, say something like $225k – $250k.
In the end the difference between a commission on $225k & on $250k is only $175. Other agents may be different, but to me, I would MUCH RATHER have a client that knows for sure I am looking out for their best interest and ends up being extremely happy with my service and therefore uses me in the future and recommends me to others, than try to get another measly $175. That is just good business practice.
I know my situation and splits are not what other agents have but I hope it helps.
Commission
Now is the time to be a “Move-up” home buyer. . . 1
“I really need more room, our house is bursting at the seams, but the market is so bad, we just can’t afford to sell right now”.
I hear this statement too often these days. So many people I talk to are scared to death of the current real estate market – like deer caught in the headlight – they just are frozen and can’t decide what to do. They figure since the market is down, now is definitely not the time to be selling their current home and trying to buy a bigger home, even though they may desperately need the room, either because of a growing family, or other reasons.
Let me give a simple example of why this fear is keeping you from the truth. Example Home Buyers – Steve & Kristin – bought their first home back in 2003 for the average price of a Chester County Home, which then was about $325,000. They put 5% down and took a loan of about $308,000. Today their home would be worth about $360,000 to $370,000, which is still pretty good. Yea, it’s not $399,000 that it was a couple years ago, but that’s still pretty good appreciation. Plus they probably have been paying their balance down.
Let’s assume that they even took a home equity loan of $20,000 3 years ago to put in a new kitchen. So that makes a max of $320,000 that they may owe on the home. With the average cost of 7% to sell real estate in the area, they would still walk away from the sale with approximately $25,000. That’s a good chunk of change to put down on your next home.
Now, if the value of real estate in Chester County is down about 10% -15%, that same percentage is worth more money on a $500,000 home than a $300,000. So, while they may “lose” $10,000 by selling now, they save $20,000 on the purchase, for a net savings of $10,000. If you reverse the example, it doesn’t work in their favor. If home sales improve 10%, Steve and Kristin might sell for $400k, but now their dream home is worth $550,000, which would cost them an extra $20,000, instead of saving $10,000.
I believe the illustration below says it all.
If you are considering selling your current home and/or buying, feel free to contact me, Chris LaGarde, for a pressure free consultation. I would love to help bring clarity to your real estate decisions.
Tracking Home Mortgage rates Comments Off
How many of you know exactly what Home Mortgage rates are doing right now and where the experts think they are heading? If you are planning on refinancing, selling a home or buying a home, this is one VERY important piece of information that you should get daily updates on.
Who has time for that you may ask? Norm Miron, with our local Wells Fargo office makes it VERY easy! Simply go to his website, click on the “Interest Rate Alerts” and sign up. It’s free & simple and every day about 1pm you will get an email with what the rates are for that day.
For me, as a real estate professional in the Chester County/Downingtown Area, I find it extremely helpful and interesting. I can tell you that rates have been pretty volatile as of late. In fact a few weeks ago we saw the 30 yr conventional rate go from 4.875% to almost 6% in one day. Now that has come back down and as of late they are at about 5.5%. But, I never know what my daily alert email will bring.
When rates jumped for a week or two, I heard a lot of fear from buyers I was currently working with. I shared with them a little perspective that even 6.5% is historically low. Take a look at the graph below. Over the last 17 years, mortgage rates have averaged more around the 7% – 7.5% mark, so even 6.5% is still a point below the average. And when you look at the rates from a longer perspective, the lowest they have been in the last 50 years is about 4.85%. So if rates are historically low, where are they most likely to go in the future? That’s right UP. Take advantage while the getting is good.
I have also included a table that shows what the experts think the rates will do in the next 30 and 90 days. Most thing in the short term they will drop again, slightly. But then over 90 days, it’s a tie between drop or rise slightly. I always tell home buyer clients – when you try to “time” the market, you almost always loose.
If you are considering selling your current home and/or buying, feel free to contact me, Chris LaGarde, for a pressure free consultation. I would love to help bring clarity to your real estate decisions.
Mortgage rates over the last 17 years
Reproduced with the permission of Mortgage-X.com
| Over the next 30 days: | Over the next 90 days: |
| rates will rise significantly: 0.0% | rates will rise significantly: 0.0% |
| rates will rise slightly: 30.4% | rates will rise slightly: 34.8% |
| rates will remain unchanged: 17.4% | rates will remain unchanged: 21.7% |
 rates will decline slightly: 47.8% |
rates will decline slightly: 34.8% |
| rates will decline significantly: 4.3% | rates will decline significantly: 8.7% |
Absorption Rate of Real Estate in Chester County 1
Here is a quick look at the price ranges, by increments of $50,000, and how many months of inventory exists for each one. While looking at this, please keep in mind that the rule of thumb in real estate is that when you have 6 months or less worth of inventory, you have a “Centrist” market, meaning the market is balanced. Anything less is a Sellers market, anything more is a Buyers.
When examining this chart, it becomes clear that homes that are selling for under $251,000 are actually in a slight Buyers market. Even homes under $350,000 are in more of a “Centrist” market. The reason for this is that a majority of homes under $300,000 are bought by first time home buyers. At the moment, a majority of the buyers in the market fit that category, not to mention the crazy low interest rates and the $8000 tax credit.
This is the type of information buyers need to understand that they cannot throw an offer at a seller that is more than 10% or more off the asking with out offending them and getting laughed at. Yes – there are rare circumstances where a home is listed way to high. But, when that is the case, it usually tells you that the seller is not willing to deal with reality, or their Realtor is doing them a huge disservice.
For any home over the $300,000 mark, this means if you don’t have to sell, then don’t. But if you do remember, it is a price war and a beauty contest. Meaning your home has to show extremely well, and your price needs to be aggressive, and a good Realtor will help you know exactly what that is.
What do you think?
