GET REAL – Buyer Always Pays

Let’s Get Real about Buyers Paying Real Estate Commissions. Much of the recent news coverage of the real estate industry has focused on the shift that buyers now may be the one paying their REALTOR commission. Well, this shouldn’t be a newsflash, but the truth is the buyer ALWAYS pays.

Let me break this down for you. Say a homeowner sells their home for $500,000. Before the seller sees a dime of that $500,000, the transaction costs, including real estate commissions, are paid out through closing using the funds the buyer brought to the closing table. So who’s money actually paid those commissions? Oh yeah, the buyer’s money! It doesn’t matter if that money was from the buyer’s down payment or from the buyer’s loan…it was the buyer’s side of the transaction that made paying those commissions possible.

The actual thing that’s changing is a seller can no longer advertise a pre-determined commission amount to the buyer’s agent as a part of the MLS marketing. But rest assured a buyer’s REALTOR commission will still be negotiable and paid at closing. Maybe from time to time its paid by the buyer directly or, more likely, worked into the price of the home as it more commonly is now.

But make no mistake about it, either way the buyers always pay.

GET REAL – CA Dream “For All”

Let’s Get Real about California’s new loan program coined Dream For All. The Blue Waters Group has this shared appreciation 2nd mortgage available to eligible applicants when it comes back on April 3rd, but is it really a Dream “For All?”

It truly is a great loan program for those who qualify, as it will allow folks to buy with no money down, avoid PMI, and keep their monthly payment at a reasonable level.

The program is, unfortunately, underfunded. The state legislature recently allocated $220,000,000 in funding for CalHFA’s Dream For All loans, which will likely only reach approximately 2,000 California applicants. To put that in perspective…our state had over 250,000 transactions in January alone. So Dream For All loans will impact less than 1% of transactions.

This program is getting a lot of hype and I am happy to help you apply for it before the application window closes at the end of April. Keep in mind, however, it will not end up being a Dream For All, but rather For a Very Lucky Few.

With that said, it’s a great program if you qualify and are fortunate to have your name pulled in the lottery system. Reach out to me and I can help you navigate the application process and give you more details about CalHFA’s Dream For All loan program.

GET REAL – Price Fixing

Let’s Get Real about Price Fixing in Real Estate. There is this misguided myth that our industry price fixes commissions, and nothing could be farther from the truth. In my 22 years in this business, I have never, ever had anyone tell me how I should structure a real estate commission. 

You’ll find a ton of click-bait headlines out there today proclaiming that a recent REALTOR class-action lawsuit settlement aims to drastically cut commissions in the real estate industry, but if the market really demanded lower commissions it doesn’t need a class-action lawsuit to enable that. The American real estate agent marketplace is one of the most competitive and creative industries in the world, and no one is out here telling practitioners or consumers that commissions are fixed.

In fact, on every California listing contract it’s put in bold lettering to advise sellers that commissions are not fixed. And if a market disrupter wanted to come in and offer lower commissions to consumers, which they do constantly, they are certainly at liberty to do so.

No one is going to convince me that 2 million realtors are acting as a unified cartel who is fixing commissions, and you shouldn’t let anyone convince you too. Home buyers and sellers have been able to and will continue to be able to negotiate commissions with their selected REALTORs at will.

GET REAL – Commissions

Let’s Get Real about Commissions. There have been a ton of sensational headlines in recent days about a settlement the National Association of REALTORs proposed last week, and I’m here to set the record straight.

There are some who think this settlement will revolutionize how real estate transactions work. Well, that may be true in Missouri where the class-action lawsuit was initially filed, but out here in California we already operate very similarly to the proposed settlement terms.

For example, the biggest change will decouple commissions, meaning the seller pays their realtor and the buyer pays their realtor. Now, there are some significant downsides to mandating decoupled commissions that we don’t have time to get into on this post, but again in California there are already buyer contracts that state a buyer is ultimately responsible for paying their own realtor. While not required, I’ve been using these buyer-agreements for years and require all of my team to use it too so I don’t anticipate significant changes to my practice and interactions with clients.

In most transactions today the seller ends up compensating the buyer’s agent, and I think that will remain the norm. Informed and intelligent sellers will continue to see the value a buyer’s agent brings to the successful marketing and sale of their home, and will continue to offer compensation at similar levels as they do today.

The procedural changes proposed in the settlement agreement are not finalized and even if they do they won’t take effect until the second half of this year, so it’s a bit too soon to know exactly how things may play out, but rest assured REALTORs will continue to be a valuable part of clients home buying and selling experiences.

California Dream For All Loan Example

Our team has become well-versed with the new California Dream For All Loan program and is ready to offer it to first-generation home buyer clients when the program is released next month.  Let’s unpack a common example and see how this program functions.

Assume someone buys a home for $500,000.  They would obtain a traditional 30-year fixed loan at a fair market interest rate for 80% of the purchase price, making the loan $400,000.  Now instead of making a $100,000 down payment, something most first-generation home buyers don’t have, they obtain a 2nd mortgage from the state of California for the needed $100,000.  No monthly payments are required and no interest accrues on this $100,000 2nd mortgage.  But it is not a grant; it is not free money.  This 2nd mortgage is a Shared Appreciation Loan, meaning that when the home buyer goes to sell the property they have to pay back the loan in full AND share in the gained equity with the state of California.

Lets see how those numbers work.  Lets assume this $500,000 home appreciates over the next few years and is now worth $600,000; it has appreciated by $100,000.  Most folks utilizing this program will need to pay back 20% of that appreciation to the state, in this case $20,000 dollars.  So when they sell the home, they will pay $120K to the Dream For All mortgage, the outstanding balance of the 1st mortgage that started at $400,000, leaving them with $110,000 in equity before selling costs.

So, in a nutshell, a borrower who put in nothing for a down payment ends up earning nearly $110,000 in realized equity.  And to do so, they had to pay $20,000 in shared appreciation to borrow a $100,000 loan. 

Here’s another example created by CalHFA worth taking in:

Like any loan program, there are qualifying restrictions and there are limited funds available so a lottery system is being implemented by the CA Housing Finance Agency to award approximately 2,000 folks to utilize the program. Contact my team and I for the full details on how first-GENERATION home buyers can take advantage of this new loan!

GET REAL – Education

Let’s Get Real about Education in Real Estate. It’s not a field that requires a ton of it. To get your license you have to have a high school diploma; that’s it! To keep your license, you need to complete a few courses every four years, and I just completed mine last month.

There are a ton of classes to take once you become a REALTOR, but most of them are offered by sales companies who teach you how to get folks attention. Every day I get emails offering classes on social media mastery, You Tube proficiency, scripts for cold calling, and so on.

I try to focus on education that helps me give value to my clients. Here is a list of some of the educational classes I took last year. Again, they were aimed at learning something new so I could provide value rather than learn a new gimmick just to get your attention.

The real estate industry is constantly evolving, so even though you can get into the business with very little education, it takes a learn-for-life mentality to stay sharp, relevant, and helpful.

Spring Market Comes Before Spring Season

For those of us who miss the sunshine during these cold wintery months, springtime is a welcomed season. With daylight savings and the spring equinox both later this month, it feels like Spring is right around the corner.

But for the real estate market, spring is already here! The months of April-June (known as the Spring Market) are generally when we record the highest number of sales in the Sacramento region. A sale doesn’t typically close until 30 days after the listing goes into escrow, which means the market activity today gets reflected in those Spring month counts.

As this current crazy storm passes through Northern California and the weather eventually heats up, more folks will consider their options to buy or sell. If you’ve been thinking about a real estate transaction this year, don’t wait until Spring Break to do these essential “Spring Cleaning” steps!

  • Buyers need to get pre-approved for financing, check their credit report for any errors, and become laser-focused in the areas or amenities that are most important to them
  • Sellers need to spruce up the exterior of their homes, clear out the clutter, and do market research to identify how their home compares to other recent nearby sales

The Blue Waters Group is uniquely abled to help both buyers and sellers in this Spring Market. As experienced REALTORS and Mortgage Brokers in our region, we are well-versed in the changing dynamics of our market and can best counsel you through your next transaction. We look forward to hearing from you.

Got Accountability?

What do house cleaners and business coaches have in common?  For me, they both provide accountability, but in very different ways. Let me explain, in hopes of inspiring you to recommit to any 2024 goals and resolutions!

Thursdays used to be our family’s ritual clean-up night.  We would tidy up the house in preparation for our house cleaner’s Friday visits.  Seems crazy, right?  Clean up the house for the house cleaner? Actually, it makes good sense!  While our house cleaner was a wonder and did more in hours than we can do in days, she can’t do it amongst clutter.  So, we got the house in order ahead of time so she can help keep our home nicer than we ever could on our own.

In an indirect way, a house cleaner is a great accountability partner.  Before she comes, we clean the house so her time (and our money) is spent efficiently while she is there.  After she comes, the house is so sparkly that we want to keep it that way.  This brief, hard work improves the cleanliness of our home even when she is not around because we want to stay accountable to her high-caliber work.

In a much more direct manner, I have had an amazing business coach as a professional accountability partner.  Just like a house cleaning, a regular appointment was scheduled every two weeks.  I knew that in order to make the most of our time together I must have my “house in order” so we can spend time on the important tasks at hand.  For me, hiring help is not so much about having someone do it all for me, but rather help me achieve things at a greater level by keeping me accountable.

You don’t need to hire someone for accountability (although paying for help is a great motivator to remain accountable!).  A friend, co-worker, or spouse can be there for you, either directly calling you out (like a business coach) or indirectly inspiring you towards improvement (like a house cleaner).  Both approaches lead to effective accountability.

We are a month into the New Year. Have you found it hard to stick with any goals or resolutions you set for yourself in 2024? Find an accountability buddy to have greater consistency and follow-through!

GET REAL – Marketing

Let’s Get Real about Marketing. There’s no 1 right way of promoting a business, and in real estate it’s common for REALTORs to use automated ads to stay in front of their clients. Maybe it’s a baking recipe postcard, or an email newsletter written by a marketing agency, or even a video like this where the agent is reading a teleprompter script that they paid for to sound smart on camera. And these tactics kind of makes sense, right?! If we are all busy helping clients buy and sell homes, who has time to create marketing materials?

But that approach sort of backfires when the same copied content is used by many others. Check out this screenshot from my inbox last month where I received the exact same canned email wishing me a Happy New Year from 5 different real estate professionals. There’s nothing personal or sincere about this; kind of falls flat if you’re the audience, right?

For me I make it a point to create all of my own marketing content. In the age of AI and virtual assistants, some will probably say I’m inefficient and old-fashioned for doing so. And they’d be right! But it also makes me genuine and authentic. I would like to think that before you work with me, you would want to know about me, my business, and my approach to serving my real estate and mortgage clients. And how are you learn those things if I’m out here hocking generic stuff that others pre-fabricated to be used by any REALTOR willing to pay for it?

Whether it’s the 200 posts I’ve written at MattsMemos.com, these Get Real videos, or emails if you’re on my mailing list, you can count on me keeping things real. If it’s from me, it truly is from me.

GET REAL – Lead Generation

Let’s Get Real about Lead Generation. Finding new customers is an important piece of any business, but in real estate there is an usually high emphasis put on it. Case in point, a very prominent broker and coach that many in our industry try to emulate says that as real estate agents we have only 1 job – to generate leads. Really?

I’m currently at a property in Folsom that I’m listing for sale this weekend; you can check it out at 105strouse.com. In my time working with the seller and her family over the months leading up to today I’ve worn many hats, and my most valuable jobs for her are in the days & weeks ahead as we market the home for sale, review offers from buyers, and navigate the escrow process. If I was solely focused on generating leads, I would be on to the next prospect and not caring for her when she needs me most.

I get it; in sales you need to always be prospecting, but I think the REALTORs that are really good at generating leads are really good at getting your attention, but are they any good at actually giving you value? Before you hire your next real estate professional, make sure you know if they are more focused on operating a marketing system for their business, or guiding and caring for you through your real estate transaction.