Ron Trzcinski

Pay the Commission Up Front

You go on a listing appointment and you state to the Sellers that the commission will be 6%.

Most of the time, the Sellers are so shocked that they sign immediately. Your presentation was so impressive that they were expecting the commission to be much higher. They can't pass up such a great bargain.

Unfortunately, the current market is slow and home values are down. Sellers want to make up for that decreased value any way that they can.

Of course, they will push you to list the house for more than it is worth. If you are persuasive enough, they may do some improvements to the property to increase its value or to put it into its best showing condition.

In the end, many Sellers view the lowering of the commission rate as the easiest way to reduce their costs and hence to increase their net.

Perhaps we will reduce it to some extent, but we can not work for free. We are providing a valuable service and we deserve to be reasonably compensated for our service.

With fewer sales taking place, we need to get every listing that we can. We need to put money into our empty pockets.

So we suggest a compromise. I will lower the rate, if you will pay me a portion of the commission up front.

For example, a 6% commission on a $300,000 house would total to $18,000. We could lower the commission to 4.5% which would yield $13,500 and provide a savings to the Seller of $4,500, and, obviously, reduce our earnings by $4,500. But a portion would be paid up front.

We can see why the Seller would agree to this reduction, but why would the agent agree to it. Once again, obviously, the agent would take a reduction because $13,500, although less than $18,000, is better than nothing.

Before agreeing to reduce our commission, we can, of course, state to the Seller, that while we understand their concern about their loss in the value of their home, that this same loss is having a significant impact on us as well. Let's say for example that this house was just a few short years ago worth $400,000. If they were selling it at that value, then our commission of 6% would total to $24,000, meaning that in today's market we too are feeling the crunch by a whopping 25% reduction of $6,000 in our commission.

If they are still insisting on a lower commission and we are still willing to work for less, then we can talk about them paying a portion of the commission up front, or buying down the rate.

Ask them to pay you $2,000 non-refundable up front in exchange for the lower commission. In this case, they would then owe the balance of $11,500 at settlement. After all, you will be incurring expenses with your advertising of their property and your taking precious time to get and work a contract for them. They get the discount and you get some money in your pocket for these expenses.

If they agree to this, then there is an additional benefit. Since they pay the $2,000 non-refundable up front, they are likely to stick with you as their agent so that they do not lose this $2,000 investment. Just make sure that you want to stick with them.

Remember, things are slow and you need money to pay your bills, to buy food, to stay in your own house.

Naturally, you can calculate the numbers any way that works for you. I was just providing example numbers.

Some Thoughts on a Growing Economy

Before I mention the economy, let me start with a personal story.

My family, Mom and Dad, at first, started in a one bedroom apartment close to their childhood homes. It did not take long and my brother was born. It was time to start looking for a bigger place. At the time, Dad did not believe in buying unless he had the money and, indeed, my parents had saved enough to purchase a new 3 bedroom rowhouse. Soon after moving in to their new place my sister was born. Things were looking nice for my spoiled older siblings as they each had their own rooms, but then sister number two came along so move over big sis; this is my room too. A short while later I came, got kicked out of the crib, and moved in with my big brother. It was a double bed for two kids but it did not stop him from yelling "Hey stop kicking me." Finally the fifth of us had arrived. Fortunately, we could now afford to move to a four bedroom house. Things were looking good. However, eventually, my brother moved to a place of his own, my sister, although in school was traveling the world, then my next sister, and then me all left the nest. Of course, this was great for my little sister who now had three bedrooms all to herself.

We can stop here. Everyone knows the progression of a family. How does this compare to the economy?

At first we were a small country, but we grew. A plentiful land allowed the early families to quickly grow. There was enough for new families to immigrate to our land. A nation had plenty for many and it grew big, fast, and strong. Yes, it went in cycles, but, generally speaking, our country and its economy experienced a copious expansion.

And now the economy has begun to stutter; economic pundits are befuddled as to how to start it up again, doomsayers are abundant, with the president of the country being the biggest among the crowd.

Is the economy like the family that grows but eventually dies off? Has our country run its normal course of life? Are we hopelessly clinging to life support systems created by our government? Have we come to the end?

Let's go back to the family. Yes, Dad did die, but his children have had children, and theirs have had some more. The education level, the knowledge, the experience, and the aspirations of these new generations far exceed those of Mom and Dad. New horizons are visible, which were never seen in the past. It seems more likely that the natural course of things is to grow and improve.

Many people have basically blamed the current setbacks in our economy on the so called housing crisis and its supposed corresponding credit crunch. Is there more to it than this? What else could be happening?

Remember prior to the financial setbacks of today some other major concerns, such as the following:

• The baby boomer population was aging and was moving into retirement. What does this mean? Fewer people in the job market; people making less money; less money being invested in savings; more money being removed from savings. All things which are counter to growing an economy.

• More jobs being transferred out of the country. India was taking computer programming jobs and customer service jobs. Other countries were taking manufacturing jobs that used to be done in America. What does this mean? Fewer Americans were working; less money was available to purchase products; less money was available to invest.

• Illegal immigrants were taking jobs in the US, while US citizens were going onto the unemployment rolls. These illegal workers were not paying taxes, were sending money back home to their families in other countries, and were investing very little in US goods. What does this mean? Fewer legitimate workers, less money going into the economy, and more money flowing out of the economy and the country.

• An educational system that was producing far too many incompetent people for today's high technology workforce requirements. Many jobs were going to people who were more sufficiently educated in other countries, with the jobs frequently going to those countries. What does this mean? Fewer employed people, more people seeking government assistance, and, again, more money flowing out of the country.

It is true, that the problems in the housing market have caused some of the current economic concerns, but let's be realistic; they are far from the only reason for our situation today. Mortgages only feed the economy with so much of its monetary fuel; there are many other sources which normally feed the economy. The foreclosure rate in good times was close to 4.0% to 4.5%, so while an increase to 6.0% is not good, it is not going to be, by itself, enough to cause a severe collapse of the economy.

We should not let one issue blind us from the many issues which make our economy so complicated.

So what can we do?

Remember in the story of my family, how as we grew, me and my siblings were at first spoiled, then sharing the same resources, but in the end growing well beyond our little 3 bedroom rowhouse.

In many of the economic and social concerns, which I have stated above, there is an underlying theme. We used to be spoiled; the world economy was almost synonymous with the United States economy. We now unquestionably have a world economy, which can not be overlooked by any given country, even one as big and as strong as the United States. The Country should not be looking for isolationist ideas, but rather, it should be leading the way out of it's and everyone else's 3 bedroom rowhouses.

When a true attitude of "Yes we can" arises, then yes we will, in the United States and around the world, move to prosperity for all.

Rental Payment Incentive

You might call it positive reinforcement versus negative reinforcement.

In a typical lease, the tenant may be required to pay the rent by the first of the month. If they are more than five days late, then a penalty may be added. For example, the rent is $1,000 per month due by the first of every month in advance. If they are late, then they pay a 5% penalty or a total of $1,050.

Although one would think that a renter would want to avoid the penalty and hence pay their rent on time, it is all too frequent that the renter will get into a rut and consistently pay their rent late.

Unfortunately, many landlords are not professional rental managers or are willing to either accept the continual late payments or to not even add the penalty to the rent. If they otherwise have a good tenant, then they are satisfied with the late payments.

Let's take almost the exact same situation, but reverse the wording so that it appears to have a positive outcome for the tenant.

Instead of a penalty of 5%, give a 5% reduction for rent paid on time. For example, the rent is $1,050 due by the first of the month in advance, but if it is paid five days early, then it is reduced to $1,000.

It is primarily a psychological difference, but it may be just the incentive that a tenant needs. If it does not provide the incentive, the landlord is still no worse off.

My Sign?!

They are just signs. I use them to direct buyers to my listings or open houses. I use them in front of my listings to get the word out to all of the people passing by.

They are just signs, but I have so much trouble with them.

I have an Open House and I strategically place the signs, with colorful balloons, to lead into my listing and then I wait for the flood of potential buyers . . . and I wait, and I wait, and no one shows. When I eventually close down for the day and go to retrieve my signs, I find that they are not there, or, at least, the ones that are on the main route. No wonder no one came. Who took my signs?

• Perhaps it was an agent who was just starting out and had no signs of his own. I am glad to help.
• Maybe it is the neighbor who lives at the corner house. He may have a two acre lot, but he'll be damned if anybody is going to put a sign at the corner of his lot. Usually I ask for permission.
• Occasionally, I have found my signs. I have spotted them thrown in the gulley on the side of the road or back into the woods. Young punks with nothing better to do. One time I found them by the side of the firehouse. There were no fire fighters available to ask what had happened.

. . . And then there are the signs in front of the house.

• In one case, a neighborhood punk thought that I needed a greeting on my sign, hence he wrote "curse you, b____". Why didn't I think of that? I should put that on all of my flyers.
• On another listing, in a more upscale part of town, the youngsters wrote something along the lines of "Joanie loves Chachi". I wonder if that was a material fact which I needed to disclose.
• There was a listing with no front yard, but a nice railing along side the steps. I took great care placing a sign on each side of the railing and making sure that they were level and secure. The next day when I came by the house, the signs were sideways.
• Was it windy or was it a hooligan? At this particular listing, I kept finding the sign hanging from one hook or completely on the ground. I noticed that it was frequently windy at this site, but I was sure that I was giving extra security for this sign to remain hanging. Eventually the sign was removed and gone.
• And then there was the worst of all. I had a great waterfront listing. It had a sign on the road side and another on the water side. I was getting calls like crazy from the boaters seeing the water side sign. But then, the storm surge came. Six feet of water did quite a bit of damage. As I looked around afterwards, with the owner, surveying the storm's wrath, his SUV floated over to the neighbor's property, his boat severely damaged, and the walls of his house collapsing, I wondered "Where in the heck are my signs?" The signs, the posts, and all were nowhere to be found. And the sign company wanted to charge me for the posts. Hey, it's not my fault that you don't have hurricane proof posts.

How do I get there?

My client wants to see a listing. I know generally where it is, but look at the directions on the listing to find the specifics.

What do I find?

• The directions indicate to use MapQuest.
• The directions take me down a one way street in the wrong direction.
• The directions take me all the way across town from the agent's office to the property.
• The directions are so messed up that they must be for another property.
• The map shows that the property is located in the Bay; good thing I didn't use a map search to find potential properties for my buyer.

Have you been to the house yourself?

How do you provide directions for your listings? Do you lead people through the crime-ridden part of town or past the run down houses or do you actually give it some thought? You are trying to sell the house, right?

Yes, I can get to the house and I will, but I have to wonder, if you do not give attention to this small detail, then how difficult will it be to work with you if my client wants to submit an offer.

The price and condition of the property are important, but not if the buyers can not find the place.

It is a small point, but occassionally frustrating.

Ah, finally, there it is! Now, where is the lock box?