Archive for August, 2006
My Buyer’s Reward Program
August 24, 2006
Earlier this summer, I wrote about how my brokerage, Thunderbird Real Estate, has begun offering $1,000 cash back to (most) buyers. The management feels that hey, it’s a buyer’s market, and the buyers ought to be catered to – hence, we have this little incentive going on. As I understand it, though, the incentive is due to end Labor Day Weekend. Who knows, it might be extended…but extended or not, it got me to thinking…
Why not do one better? So here’s what I have come up with: my own, personal, Buyer Reward Program! Under my new program, cooperating buyers can receive an amount that is up to 20% of the commission paid to the Buyer’s Agent’s brokerage by the seller. This money will rebated back to them as credit for their non-recurring closing costs. This is virtually the same thing as putting cash back in the buyer’s pocket, as typically, buyers have to pay their closing costs (usually at least 1.1% of the purchase price) with cash out-of-pocket.
Under my new Buyer’s Reward Program, someone buying a $500,000 condo where the seller offers to pay me a 2.5% commission (e.g. $12,500) would receive $2,500 as a credit for non-recurring closing costs. That’s $2,500 that stays in the buyer’s pocket, left over to spend on furnishing the house, buying new carpet, painting, or just to help make that first payment!
I’m hoping this is going to sound attractive to a lot of people – and well it should! It ought to be worthy enough, at least, to get some people asking, “Where do I sign?!” Where, indeed? Long time readers, you may recall how, going still back a little earlier this summer, I wrote about the Buyer Broker Agreement (BBA), which I had just gotten all fired up over after taking a GRI Class. I mentioned that it really did seem like a good idea. At the time, I wrote:
Here, then, is the truth of the matter: my Buyer’s Reward Program is simply a twist of the Buyer Brokerage Agreement, in the form of an addendum to the BBA which details the particulars of the way the Buyer’s Agent is to be paid, and what the Buyer is rebated. It’s a healthy amount, though: just $2,500 on a $500,000 purchase – but it’s $3,750 on a $750,000 purchase – and $750,000 is just the median home price in Santa Cruz County!
I’m sure it’s been thought of and done before many times – I believe that this is what Zip Realty does, come to think of it. But I haven’t seen much of Zip Realty around lately. That being the case, I’m going to shamelessly hype my program as “Exclusive!” Forgive me, but it’s got to be done. I really do think it’s something a Buyer ought to give serious consideration to participating in. In fact, I’m sure that many Buyers in Santa Cruz would be interested in participating! If you, or someone you know, is interested in saving some good money on a great Realtor, have them call me! We can talk about other great ways to save them money on their Real Estate purchase as well! A $2,500 rebate from my commission is good for the Buyer; getting the Seller to lower the price $30,000 and paying you another $10,000 to cover other costs is a great thing – and that’s what I’m all about.
I invite you to view my web page about my Buyer’s Reward Program. Please pass the URL along to anyone you know who would be interested – remember, I love referrals! The URL is:
http://santacruzhomebroker.com/reward
Posted by Administrator at 1:33am
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Santa Cruz Architecture
August 22, 2006
Being a Realtor is really an interesting business. The thing that’s most interesting about it is that it touches upon so many aspects of life! Shelter, of course, is one of the most fundamental things about life – right up there with food, air, and water. Speaking of Shelter, I’d like to turn y’all on to a great book:
The Sidewalk Companion to Santa Cruz Architecture
I’ve seen this book a bunch of times in the windows of Border’s Bookstore – although I am sure that they have it at Bookshop Santa Cruz and who knows, maybe even Logo’s. Capitola Book Café? More than likely. But I shop at Borders, even though I know that I’m probably hurrying about the coming of the apocalypse for giving my hard-earned money to another corporate giant.
I really enjoy reading this book! It talks a lot about Santa Cruz History, and the people who helped to build the city – it’s got a lot of local history in there. It won’t be mistaken for anything like a People’s History of the United States, but that’s OK: it’s mostly about our local architecture. What’s nice about it is that it really is a walking tour book – you can walk around the neighborhoods and learn about the buildings that you see there. It also has a lot of information on buildings that used to exist, before they burned down or were ruined in the quake of 1989.
Posted by Administrator at 1:49pm
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Buyer Buy-Down
August 17, 2006
A few posts ago, I wrote about Seller Rate Buy-Downs…many sellers are offering to “buy down” the interest rate that the buyer will pay on the loan. Many lenders are approaching Realtors with this idea: “preserve the purchase price, just buy-down the buyer’s rate!” The theory behind this approach is that the buyer says, “I can only qualify for a $700,000 purchase price, therefore I can only offer you $700,000 for your home which is listed at $750,000.” The crafty seller’s agent then says “Oh well then how about we just buy down your rate so that your payments would be the same as if the property were only $700,000 – or less?”
What happens then is that the seller credits the buyer, say, $10,000 – and buys-down the buyer’s interest rate from, say, 6.825 to 6.375, which means the buyer gets lower payments. Very clever – well, not really. The clever thing for a buyer to do in this market is to say to the seller, “I will offer you $700,000 for your home which you are asking $750,000 for – and oh, I want you to cover $10,000 in my closing costs.” The seller then effectively sells for $690K. The buyer uses this $10,000 to buy-down his own rate – a half point, a full point, etc – while at the same time ending up with a mortgage amount that is $50,000 less. And remember: this $50,000 is the buyer’s profit when he goes to sell.
Why am I blathering on about this? I think that as a seller’s negotiating tactic, it is a poor one. However, I do believe that as a buyer’s financing mechanism, it is a good one. It is my job, as someone’s Realtor, to negotiate the very best price for my buyer clients when purchasing a property. I will try to get that $750,000 property for only $700,000 – but if at the same time you can secure an additional $10,000 credit fromthe seller and use that to buy your own interest rate down – why not? With rising interest rates, it may make sense for some buyers (depending on how long they intend to keep the loan, etc.) to buy down their rate. For example: a $500,000 loan at 7.00% interest, ammortized over 30 years, will cost $3,327 per month. The buyer, however, could pay discount points to lower the interest rate down to, say, 6% – and this brings down the payment on this $500,000 loan to $2,998 – a savings of $329 per month.
Doesn’t seem like a lot of money to you? Well, if you do hold the loan for 30 years, that’s a savings of $118,440. However, very few people hold their loans anywhere near 30 years. If you plan to hold the loan for, say, 5 years, that’s $19,740 in savings. If it costs you $10,000 to buy down your loan that amount, is it worth it to you? Well, maybe – but if you can get that $10,000 from the seller, is it THEN worth it to you? Again, it depends: maybe you would rather use that $10K to buy a new roof that the house needs, etc.
Either way, negotiate as hard as you can to get the best price possible. Get a credit from the seller, and use it as you see fit.
Posted by Administrator at 5:05pm
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Sales Plunge 30% in July
August 15, 2006
Did that headline get your attention? It sure got mine! Just a few days ago, I was telling some colleagues: “It’s not that bad – while sales in California in June were down around 26%, here in Santa Cruz they were only down 11%.” And that’s about right…but now the July numbers in, and they tell a starker story: sales in Santa Cruz County were down 30% from June of this year…and down about 32% from July of 2005. Yikes! That’s a pretty big drop!
For those of you thinking this is the beginning of the end – you may be right, but, oddly, the median home price continues to march right on upwards. What this indicates to me is that sales of more-expensive homes are stronger than sales of less-expensive homes. Last year, the less-expensive homes were just flying out the door, so to speak – but this year, it’s a tough sell for small homes on small lots.
Readers of my Santa Cruz Market Trends Newsletter will have received this news yesterday – if you want to get the latest market statistics, subscribe to my newsletter or check out the Real Estate Local Report on my website!
Posted by Administrator at 8:54am
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Scene of the Crime
August 12, 2006
This past Wednesday I went back to the house I’ve got in escrow, the one where we released our contingencies last weekend. I was there to meet a fellow who has got quite an interesting job. He works for Crime Scene Cleaners, aka Decon Specialist – whose website banner reads, “First call 911. then call us.” This fellow has found himself quite an interesting niche – cleaning up the scenes of murders, suicides, “unattended deaths & human decomposition” and the like.
Well, that’s just half his business. The other half of his business is decontamination – where they do more pedestrian work like odor removal, high pressure washing, and of course, biohazard remediation, like sewage spills and other fecal matter.
Which is why I was meeting the gentleman from Decon Specialist (George) out at the property the other day – the basement area had a colony of rats living underneath it, who had torn out most of the subfloor insulation and spread generous quantities of fecal matter all over the subfloor area. My clients didn’t want to have that kind of filfth underfoot, and so it was something they wanted taken care of. After poking his head into the subfloor area, George and I took a walk around the house looking for ways of ingress into the property. We found a spot where the sewer pipe exits the concrete foundation – a small gap in the concrete around the pipe. George explained to me that even 1/4″ is enough of a space for a rate to squeeze through.
George also told me something interesting: if a home fire is deemed to be caused by rodent infestation (i.e. the rodents chew up the wiring, and that causes a fire), that most insurance companies won’t pay off the claim. I don’t know if that’s true or not – I just did a bit of reading on the internet, and a couple of pages I read say that most insurers do pay for rodent-caused fires – but it’s something you might want to ask your insurer about if you are concerned!
After our meeting, George gave me an estimate for the decontamination: $1700+. Wow, that’s a decent chunk of change. He had told me they charge only $150/hour – so I was figuring like $1,000 or so. Well, he quoted me for five hours ($750) – plus about $1,000 worth of other add-ons too numerous to list. Whatever – it’s a nasty problem, and I want my clients to be happy. Of course, they wouldn’t be happy faced with a $1700+ bill – so I’m paying for it. Shhhh! Don’t tell anyone, I wouldn’t want any rumors to get out that I’m in the habit of giving up part of my very hard earned commission. As it happens, though, I love my clients, and I want them to be happy with their new home; the purchase was stressful enough, and taking this worry and expense off their shoulders is well worth the price.
Posted by Administrator at 9:32am
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