Drew Peterson

Welcome to our blog series on the Top Ten Realtor Myths. In the last blog we debunked the #10 myth, that the buyer pays a real estate commission in Florida. That means we're on to number nine.

Myth: This is a two-part myth. Part one is that when you hire a Realtor, the Realtor's entire company also works for you. Part two is that the company a Realtor works for is an indication of his or her skill or experience.

Fact: The vast majority of the time, the Realtor you hire is the Realtor who will market your home, communicate with you, negotiate offers, and close the transaction. You'll probably never have contact with anyone else in the brokerage. Also, great Realtors work for all kinds of companies, big and small.

We'll start with part one of the myth, where there's actually a certain level of truth involved. When you sign a listing agreement, you sign it with the brokerage, not the individual Realtor. Therefore, you are technically represented by ABC Realty, not Jane Q. Realtor.

The fact is, however, that you will probably never speak with anyone at ABC Realty other than your Realtor. In most real estate offices, each agent works as an independent contractor and is responsible for his or her own listings. Although some brokerages do offer incentives to their agents to sell in-house listings, for the most part your Realtor's listing will be treated just like any other.

That actually leads us to a mini-myth associated with this larger myth. During a listing presentation, a Realtor might tell you that his brokerage provides advertising to him as a part of his being associated with the company. He'll tell you, because of that, he will be able to advertise your home by sending out just listed cards, putting your home into the newspaper or a home buying publication, etc.

Don't buy it! These methods of advertising are less than 5% effective in selling your home, according to a National Association of Realtors study. Instead, they're designed to generate buyer leads for the office and for the agent.

The second part of our #9 myth says that the company a Realtor works for is an indicator of the Realtor's skill or level of experience. This simply couldn't be further from the truth.

There are a variety of reasons a particular Realtor might decide to join a particular company. That company might offer a better commission split to the Realtor (more money in the Realtor's pocket per transaction), might provide the Realtor with leads, or might offer the Realtor health insurance (a major plus in our industry). Also, because most real estate offices are franchised (independently owned and operated), there can be wide variations between, say, one Keller Williams office and another.

The bottom line is that you should remove brokerage from the picture when you are interviewing Realtors regardless of whether you are a buyer or a seller. Instead, focus on that Realtor's track record. If she has a strong history of closing sales and you are comfortable with her, it really doesn't matter what company she associates with.

That concludes our discussion of myth #9. Check back on Monday, when we'll bust the #8 myth. As always, we appreciate any feedback you can offer.

That's right, for the next few weeks we are going to be counting down the top ten myths about Realtors. It seems like every day that a comment made by a client, prospect, or friend reminds us how misunderstood our profession is as a whole. Some of these misperceptions are innocent and just make us smile. However, there are other misperceptions that can result in frustration and feelings of ill-will for both the Realtor and the client. It is our sincere hope that this blog series will both educate and prevent future misunderstandings. With that said, let's get to Realtor Myth #10.

Myth: In Florida, the buyer pays a commission.

Fact: Only in extremely rare circumstances does the buyer owe his Realtor a commission.

The commission system in Florida is truly buyer friendly. Here's how it works.

First, the listing agent negotiates the total commission amount with the seller of the property. That amount typically ranges between 4% and 7% of the purchase price, depending on the listing agent and/or listing company. The full commission is due the listing agent if he represents the buyer in the transaction.

However, it is rare for a listing agent to represent both the seller and the buyer of a particular property. For that reason, the listing agent almost always agrees to split his commission with any agent who can bring a buyer ready, willing, and able to purchase the home. This agreement is made when the listing agent places the property in the Multiple Listing Service (MLS).

Per MLS rules, the listing agent must include his offer of compensation to the buyer's agent in the MLS listing. This offer is usually a percentage of the purchase price. Currently, three percent is considered a full offer of compensation.

Once an agent has brought a buyer to the home, a contract is executed, and the sale is closed, the listing agent pays the buyer's agent the agreed upon amount and keeps whatever is left for himself. For example, if the listing agent negotiates a six percent total commission and offers the buyer's agent three percent, he will receive the remaining three percent as his compensation.

To boil this down to its simplest level, the seller pays the listing agent and the listing agent pays the buyer's agent. The buyer does not pay anything for his Realtor's representation (with the possible exception of a small transaction fee, depending on the Realtor's company). It's a great system because it allows the buyer use all of his resources to actually purchase the home.

We hope you've enjoyed this first installment of our series on the Top Ten Realtor Myths. Check back on Friday for Myth #9. As always, we welcome any feedback!

In "No Market For Unrealistic Buyers I, II, and III", we introduced and began discussing the topic of crafting and presenting offers in a buyer's market. So far, we've covered completing the pre-offer research and crafting the actual offer. That means we're on to presenting and negotiating the offer. In this phase, more than in any other, skill and experience can make all the difference in the world.

Once you have completed your written offer, it needs to be presented to the seller's agent. Since this is typically done by your Realtor, we're going to focus on the items you can include with the offer to strengthen your case. First, you should absolutely include the comps you used to craft your offer. Making an offer and presenting evidence to support your reasoning is an incredibly powerful way to begin a negotiation.

Second, you should write a letter to the sellers explaining why you chose to make an offer on their house. This letter can also include personal information about yourself you think the seller would want to know. For example, that this is your first home or that you are about to have another child. Even though it sounds corny, these letters personalize the offer and can cause the sellers to actually want you to get the home.

Finally, it is extremely important to include all loan pre-approval or approval paperwork with the offer. Make sure it's on company letterhead and has the contact information for the person most familiar with your file. With this final piece of supporting paperwork, your Realtor can present the offer.

As soon as the offer is faxed or e-mailed to the seller's agent, you are officially in negotiation mode. Since this phase of the process can vary widely depending on a number of factors, we are going to stick to a high-level discussion. However, no matter what direction the negotiation takes, make sure you are firmly focused on creating a win-win result. Once the negotiation is over, you will still have at least 30 days of dealing with the other side, and you want that 30 days to go as smoothly as possible.

The first rule of negotiation is to leave emotion out of it. We know that's a lot to ask, especially since this is potentially your future home on the line, but you must leave it out. The minute emotion enters a negotiation, it gets ugly. Negotiaition experts tell you to make it about positions, not people.

The second rule of negotiation is to stick to your guns. This is where the priority list you made while crafting the offer comes in handy. When possible, only give on those items that are low priorities for you. When you do give, ask for something in return. Preferably, ask for high priority items. Most importantly, don't cross your breaking point without serious, serious thought.

The final rule of negotiation is to say "final offer", and mean it. Too often, "final offer" doesn't mean it's final. Once you say it and then continue to negotiate, you have lost your credibility. However, that doesn't mean you should be afraid to say it. If you really are at your limit, telling the seller you are not going to continue to negotiate is perfectly reasonable.

This concludes our blog series on crafting and presenting offers in a buyer's market. Check back later this week for our next blog series, "Common Realtor Myths". This is a series we have wanted to write for a long time. Basically, we will be busting some of the common myths the public has about Realtors. As always, we welcome any feedback!

In "No Market For Unrealistic Buyers I & II" we introduced and began discussing the topic of crafting and presenting offers in a buyer's market. So far, we've covered the first, and most important phase, the pre-offer research (if you missed it, click here to get caught up). That means it's time to make our way to the second phase, actually crafting the offer.

Before we get into the meat and potatoes of writing up an offer, we should note that this blog is written assuming you are working with a Realtor. If you are going it alone, please seek the counsel of an attorney prior to submitting your offer. There are some landmines in the standard contracts you'll want to avoid, and seeking the advice of a competent real estate lawyer is a great way to steer clear of them.

With that disclaimer out of the way, let's get into it. At this point in the process you have a strong background knowledge of the property and the homeowner(s). You also have a pretty good idea of the market value of the home. That means it's time to set some goals.

Begin by envisioning the best possible outcome for you. What price are you paying? How soon are you closing? Who is taking care of repairs? Who is paying your closing costs? Is there a home warranty involved? Write down the answers to these questions and any other items that would make the perfect purchase.

Next, decide on the relative importance of each item. For example, if you have to close by a certain date, put that as number 1 on your list. If price is your main concern, start there. The point of this exercise is to get your priorities in line.

Once you have a solid list you are comfortable with, review it and decide at what point you will say "no more". It is extremely important that you know your break point before you get into the negotiation. Write this break point down and share it with your Realtor. *If you don't trust your Realtor with that information, we have a whole separate issue to discuss.*

We are now at the point in the process where there really isn't a right or wrong way to do things. Each individual Realtor and buyer has different strategies for how to craft an initial offer. However, we'll give you a couple of general guidelines to follow.

First, review the information you have collected about the homeowner and property. Is there anything in here that dictates a certain price, closing date, etc.? For example, if you determine the value of the home is $15,000 more than the list price, it doesn't make sense to make an offer way below that list price.

Second, make sure to leave yourself some room to negotiate, even if it isn't on price. Buyers who make their first offer their final offer are often viewed as not serious, bullies, or both. This is where asking for some things you don't necessarily need can pay off.

Once you have crafted the offer, you're ready to present it to the seller. We'll cover some tips and advice on the presentation, as well as discuss our negotiation strategy, in the next blog. As always, we welcome feedback!

In "No Market For Unrealistic Buyers" we introduced the topic of crafting and presenting offers in a buyer's market. We'll continue that subject in this blog, albeit in a little more depth. Specifically, we'll address the first phase of crafting an offer, the pre-offer research.

Simply put, research is the most important phase of the offer creation process. We cannot emphasize that enough. If you skip this phase, it will be to your detriment. One of the unique advantages of being a buyer is the wealth of information you can very easily learn about the seller and the property. During the negotiation, this information will help you create a win-win situation for both you and the seller.

The first step in the research phase is to forget everything you already know about the property. Start with a blank slate. Humans naturally try to prove their hypotheses and assumptions, and you don't want that instinct preventing you from doing objective research.

Once you have a clear mind, log onto the local property appraiser's website and check the basic property information. That includes square footage, lot dimensions, sales history, current owners, and tax history. Next, log onto the website of the local authority that handles recording of documents. In Orange County that's the Comptroller. Elsewhere, it might be the Clerk of the Court.

Here, you are researching both the owners and the property. Check for liens, mortgages (amount, type, re-finance history), divorces, and notices of commencement (for a pool, new roof, etc.). In this market, also check for a Lis Pendens. That will tell you if they are behind on their payments.

With this information in your back pocket, it's time to research price. Although your Realtor should take the lead here, it's important for you to do some independent research of your own. Check public records for recent sales in the neighborhood to start. This can be done from property appraiser's website. You can also use one of the many websites that offer sales history and home evaluations.

When you meet with your Realtor to craft the offer, bring your research with you. Discuss any discrepancies and collectively arrive at a likely value for the home. That will conclude the research phase.

Have any questions or concerns about this particular phase? We're happy to address them. Otherwise, in the next blog we will discuss the actual crafting of the offer.