Let’s Get Crystal Clear On How Real Estate Agents Are Paid

So you’re thinking about buying or selling a house? Odds are good that the first thing you did was contact a real estate agent to help you out. According to the 2013 Profile of Home Buyers and Sellers published by the National Association of Realtors, 88% of buyers purchased their home through a real estate agent or broker.

So how exactly do real estate agents get paid?

SHORT ANSWER:

Real estate agents work for real estate brokerages, and they earn money via commissions when they assist buyers and sellers buy or sell homes.

Now let’s dispel a false assumption right off the bat…

REAL ESTATE MYTH – Agents must be rolling in the cheddar. Word on the street is that some of them make 6% or even 7% commission on every house they sell! Not exactly… Most agents are not living the lavish lifestyle you may assume they are. The income is much more modest than you might expect. Real estate agents have a median income of $40,990 with the top performers making more.




LONG ANSWER:

First, let’s go over some terminology.

When brokerages hire real estate agents they typically set them up on what is known as a commission split. This means that when a commission is paid to a real estate brokerage, it’s split between the brokerage and the real estate agent. Some common commission splits are 50/50, 60/40, 70/30 & 80/20. This will vary from brokerage to brokerage and even from agent to agent. There may be a brokerage with 5 real estate agents who all have different commission splits.

Generally speaking, in any given real estate transaction there will be between 1 and 4 real estate agents or brokerages involved in the transaction — all of whom expect to be paid.

Listing agent – This is the person who meets with a homeowner who is interested in selling their home. This person works for a real estate brokerage. This person is then hired by the sellers to sell their home. The sellers signed a contract which explained the amount of money they were going to pay this listing agent’s brokerage to sell their home. This contract is known as a listing agreement.

Listing brokerage – All real estate agents work for real estate brokerages. Every real estate brokerage has a licensed real estate broker who is in charge of the real estate agents working at that brokerage. Every real estate agent you meet will work for a brokerage like one of those mentioned. The brokerage that employs the listing agent is the listing brokerage.

Buyer’s agent – This is the real estate agent who meets a person who wants to buy a home. This agent will show a potential home buyer homes that are listed either by themselves or other listing agents.

Buyer’s brokerage – The brokerage for whom the buyer’s agent works.

It is important to note that these roles can be different in each transaction. A real estate agent can be a buyer’s agent, or a listing agent depending on the deal. A real estate agent can even be both the buyer’s and seller’s agent.

Let’s go over some different scenarios to illustrate how each of these agents and their brokerages get paid.

Scenario A

A buyer wants to buy a home. She meets a real estate agent named Brian. Brian works for The Holton Wise Property Group. Brian is on a 60/40 commission split with The Holton Wise Property Group. Brian takes his buyer to a home that is listed by Carla. Carla works for Century 21. Carla is on a 50/50 commission split with Century 21 and has been hired by the owners of a home on 123 Main Street in Cleveland, Ohio. The price this home has been listed at is $249,900.00 The sellers have agreed to pay the brokerage Carla works for 6% of whatever she can sell the house for.

Brian and his buyer put in an offer on 123 Main Street for $225,000.00 That offer is accepted by Carla’s sellers. Carla’s brokerage is going to get paid 6% of the sales price by the sellers, but why did Brian take his buyer to Carla’s home on 123 Main Street? Who is going to pay Brian and The Holton Wise Property Group?

Answer: Carla and her brokerage.

When Carla was hired by the sellers of 123 Main Street she entered their home into something called the multiple listing service (MLS). This is a website that real estate agents and brokerages use to help their clients buy and sell homes search for homes. When Carla put 123 Main Street on the MLS she offered all other real estate brokerages a share or split of the commission she gets from the sellers of 123 Main Street if they were able get their buyers to buy the house. In this situation Carla and her brokerage offered Brian and his brokerage 50% of the commission for the sale of 123 Main Street.

So let’s see how this whole thing played out.

The house sold for $225,000.00 The sellers agreed to pay a commission of 6% to Carla’s brokerage. That amount is $13,500.00.

Carla’s brokerage agreed to pay 50% of the commission to Brian and his brokerage. Carla is on a 50/50 split with her brokerage and Brian is on a 60/40 split with his.

Here is the breakdown of the commissions earned by all who were involved.

• Total commission paid by the sellers $13,500.00
• Total commission paid by the buyers $0.00
• Carla’s commission $3,375.00
• Carla’s brokerage commission $3,375.00
• Brian’s commission $4,050.00
• Brian’s brokerage commission $2,700.00

Scenario B

As I stated before these roles can change by the deal. There is not always that many people involved in the scenario.

Let’s assume Brian’s buyer did not like Carla’s house. Instead, Brian’s buyer liked a house that Brian had listed himself. This house was also listed for $249,000. The sellers signed a listing agreement with Brian that paid him a commission of 6% of the sales price. Brian’s buyer put in an offer of $225,000.00 that was accepted by the sellers.

Here is the breakdown of the commissions earned by all who were involved.

• Total commission paid by the sellers $13,500.00
• Total commission paid by the buyers $0.00
• Brian’s commission $8,100.00 (60% of the total)
• Brian’s brokerage commission $5,400.00 (40% of the total)

Source: LighterSide of Real Estate, 

http://lightersideofrealestate.com/real-estate-life/how-real-estate-agents-are-paid

Bay Area home sales: Strongest January in three years

The winter doldrums gave way to some surprising winds in Bay Area real estate last month. Across the region's nine counties, 3,372 single-family homes were sold -- the strongest January in three years.

Likewise, the median cost of homes rose by 16.5 percent from the year before, to $635,000, with similar year-over-year gains posted in Silicon Valley and the East Bay. In Santa Clara County, the $830,000 median was up by 11.4 percent from a year earlier, while in Alameda County, the $660,000 median represented a 14.8 percent gain from January 2015.

"There continues to be a lot of stress on the affordability front," said Andrew LePage, research analyst for the CoreLogic real estate information service, which released the latest numbers. He observed that the region's $635,000 median would once again buy next to nothing in the Silicon Valley hub, "except maybe a small vacant lot."

Alain Pinel broker Rainy Hake, based in Saratoga, concurred: "Most of the homes that you have at this price point are kind of nondescript. It would be interesting to take that money and move to Portland, (Oregon), or Austin, Texas. We're seeing a lot of exits from the Bay Area to some of these marketplaces that are more affordable and have an up-and-coming lifestyle."

That said, the relative strength of the Bay Area market remains a matter of perspective.

For while the year-over-year numbers were robust, the volume of home sales across the region dipped markedly from December to January: down 36.1 percent for the region. Santa Clara County's month-over-month sales were down 37 percent, while Alameda's dropped 40.7 percent.

And viewed historically, January's three-year sales high was actually about 20 percent lower than the average January, going back to 1988, which is as far back as CoreLogic's database extends.

Still, LePage cautioned against reading too much into the month-to-month numbers, which also show a small decline in median prices.

January and February typically are slow months, as many people avoid house hunting during the winter. Also, December sales were unusually high as agents and loan writers finally got the hang of new federal mortgage rules that went into effect in October and delayed many closings until year's end. Hence, the January sales drop-off may look unnaturally steep.

Amid the stock market downturn and China's slowing economy, some agents have sensed a softening in home prices, especially in luxury homes.

While it's possible that high-end sales "could eventually be impacted by an ongoing stock market downturn," LePage said, "it's also possible ... that you would see what some people consider 'safe haven' investing, where wealthy individuals choose to park money in high-end real estate."

Such trends are hard to measure, he said, but "as deals close over the next few weeks, we'll begin to see whether there's been an impact."

Source: Mercury News, Richard Scheinin
http://www.mercurynews.com/business/ci_29528329/bay-area-home-sales-strongest-january-three-years

5 Reasons to Be Thankful for a Great Real Estate Agent

Not all real estate agents are created equal. Like all industries, there are plenty of terrific pros, but once in a while a bad apple rubs a buyer or seller the wrong way and spoils it for the rest of us.

If you’ve had a bad experience in the past, don’t let it happen again. If you aren’t comfortable with your current agent, stop everything. You can find wonderful agents in every market — don’t move forward until you have.

Once you find an exceptional real estate agent, you’ll discover plenty of reasons to be thankful for them.

They’ll be there for you during the difficult moments

In the middle of a transaction that seems to be giving you more heartache than love? Maybe it’s not the “deal” you thought it was, or something just doesn’t seem right?

A good agent will take your call at 10 p.m., hear you out and support your decision not to move ahead. Buying or selling a home is a serious financial transaction — not to mention one with huge emotional and practical considerations.

Your agent should uncover any issues and, if it’s the best decision, suggest backing out of the deal before you even bring it up. They’ll be on your side, and looking to build a long-term relationship — not just make a quick buck.

They’ll help get your house ready for sale in record time

A good listing agent doubles as a project manager, designer, and connector of all things quick and fast for home improvement.

Thinking of selling, but daunted by the idea of prepping your home, making necessary fixes or simply deep cleaning? Good listing agents take on the burden and alleviate unnecessary drama from an already stressful time in your life.

With your approval, your agent can muster up a team of painters, stagers, floor finishers, home organizers — and the list goes on. As the lead on prepping your home for sale, your agent will be your single point of contact and get the job done quickly.

They know you’re juggling work, kids and all the other parts of your life

A real estate transaction can be so tedious. Someone always wants a random signature or a document notarized. Inspectors and appraisers need to get into the home, and sometimes one of the parties has a last-minute request that you can’t ignore.

A good agent realizes you have a life outside your real estate transaction. She’ll drive to your home late at night or catch you in the lobby of your office building in between your meetings for that important signature. He’ll open doors, get second bids, sometimes pull weeds and even walk your dogs.

Tasked with making your life easier and your transaction as smooth as possible, a good real estate agent is full service 24/7. And they love doing it.

They’ll send you helpful data about your home long after you’ve closed

Some agents do their deals and move on, seeing your purchase or sale as transactional. But good agents know that their services continue long after you close.

Homeowners like to know what’s going on in the market and how their investment has fared over time. Agents see homes in person each week, and can take note of comparable homes and keep their past clients informed about the market.

It’s true you have a lot of information at your fingertips already, but having an active agent keeping you in the loop, without even asking, is the best.

They have the inside track because they’re well-connected and well-liked

Often, deals fall into place because of the strength of the relationships a good agent builds over time. Being well-connected with other agents, bankers, inspectors and deal-makers means they can help you find opportunities off the market, get the attention or time you need, or get your offer to the top of the pack in a competitive bidding situation.

A truly great agent constantly has your interests, wants and needs in mind, and uncovers opportunities to find the house or the buyer of your dreams.

If you’ve found your dream agent, you have a lot for which to be thankful. If you haven’t, find a good agent and get them on your team. They can make all the difference.

Source: Zillow Blog, Brendon Desimone
http://www.zillow.com/blog/be-thankful-for-real-estate-agent-187080/

Infographic - New Home Sales

Happy Saturday everyone! Great info graphic about the status of new home sales.

Bay Area real estate: Busiest summer since downturn

Bay Area real estate: Busiest summer since downturn



Coming off a hot June, July sales for the nine-county region reached a 10-year high for that month, as deals were cut for 6,765 single-family homes.

"In terms of the activity level, it's the strongest summer market we've seen since the housing bust," said Andrew LePage, research analyst for CoreLogic, the real estate information service that crunched the numbers.

Among the leaders in the sales flurry were Contra Costa County with a 15.1 percent jump over July 2014, Alameda County with a 13.7 percent year-over-year leap, and Santa Clara County with an 8.6 percent increase. For the two East Bay counties, the July sales were the busiest since 2005, while Santa Clara sales represented a six-year high.

Sales fell 7.9 percent year-over-year in San Mateo County, where there typically are fewer transactions. But with that drop in sales volume came a new peak for median prices in San Mateo County: a whopping $1,225,000.

Elsewhere in Silicon Valley and the East Bay, however, median prices fell just enough to make some agents and buyers wonder if a seasonal cooling was on hand.

When prices were spiking everywhere in April, Bach Tran, a software engineer, listed his Sunnyvale fixer-upper -- a 1,700-square-foot "Frankenstein house" -- for $780,000 and sold it for $935,000, a price that was "way beyond even our top estimate." This week, he and his co-investor are preparing to close on their purchase of a 1,300-square-foot home in San Jose for $516,800, about $6,000 below the asking price.

Having benefited from the spring heat and the summer chill, he said, "I'm a happy customer."

"Things are cooling down a little," said Palo Alto-based Sereno agent Alex Wang, who handled both those deals. He observed that more buyers are biding their time with the result that properties are "trending toward longer days on market. If it's the right house in the right place and it's priced really attractively, you're still going to get multiple offers, but not as many as we were seeing in the spring. But this could be seasonal and we'll also probably see a slight uptick in the fall."

Prices can still inflict sticker shock in Santa Clara County, though the July median of $915,000 was down from the June peak of $946,500.

The Alameda County median was $706,000, down from $716,500 the previous month, though still hovering near the May peak of $724,000. Contra Costa County's median was $500,000, down from $512,000 in June -- and still chasing its May 2007 peak of $654,000.

Source: Mercury News, Richard Scheinin
http://www.mercurynews.com/business/ci_28666257/summer-real-estate-busiest-july-since-2005

How big data is transforming real estate

How big data is transforming real estate


Photo source: Inman News

Assessing a storm's damage to a house; responding to a prospective buyer's concerns about a property; designing offices that suit the needs of its tenants—all are key tasks of the real estate business that are rapidly being made faster and less expensive as the industry adopts lessons from technology, lessons that have already dramatically changed industries such as finance and health care.

In other words, big data is transforming real estate.

"Big data is making the commercial real estate industry more transparent," said Ely Razin, CEO of CrediFi, a big data platform for the commercial real estate finance market. "It becomes a partner to the players to the community, whether they're brokers, lenders, investors or owners."

Transforming real estate finance

In commercial real estate finance, number crunching from public and private data sources is already helping potential investors make better decisions.

CrediFi's Razin said the company's platform uses credit risk algorithms to analyze huge amounts of data from public and licensed sources, which then produce risk scores for regional real estate.
For example, prospective investors analyze how sound a physical structure is, when it was last renovated or if the prospective owner is financially reliable—all important factors that impact their decision.

Companies can also assess a building's finance, like the details of a prospective building's loans and investment platform.

Changing the business of property sales

Real estate start-up VTS (stands for "View the Space") is a smartphone app hoping to transform real estate sales by enabling owners to better assess the reactions of prospective buyers, said Ryan Masiello, co-founder and chief revenue officer of VTS.
The platform aims to speed up the process of getting feedback from prospective tenants to owners, and to help the negotiating process. It recently raised $21 million.

"If 80 percent of prospective tenants aren't moving forward and giving you a proposal because they feel the space is priced too high, or the image of the space is wrong for them, like issues with the height of a ceiling or the size of a room, we capture that information directly," said Masiello

Improving building management

Big data is also changing how buildings are managed. David Kollmorgen, international director and head of business intelligence at Jones Lang LaSalle, said the emerging "the Internet of things" is making certain management tasks easier.

"We've put sensors on the equipment in a building, for example, and every 15 seconds we get a read on the air temperature, if the fan is on or off. Then we can feed data into algorithms, like if this fan is working, then it shouldn't generate a work order to fix it. We can also figure out, is weather data correlating to x, y or z."
That can reduce expenses and the wait time in fixing problems in a building, said Kollmorgen.

But the costs of implementing sensor systems takes a lot of money and planning.

"If you look at the Manhattan skyline at night, you see lots and lots of lights on even in downtown buildings, where most of the offices are closed. Just because people have the ability to improve, by retrofitting their actual electrical systems, it would be very expensive," said Keith Outlaw, licensed real estate agent at Highline Residential in New York.
Despite the initial challenge of such a large investment, making buildings "smarter" would greatly reduce waste and spending, said Outlaw.

Source: CNBC, Marguerite Ward
http://www.cnbc.com/2015/08/04/how-big-data-is-transforming-real-estate.html