First of all, let me say that Henny Penny is running amuck,
and that most of the horror stories we're hearing about will be just that,
because Congress will have no choice but to save the 100,000 homeowners who
will lose their homes if Congress does nothing.Â
The Biggert-Waters Act, which is causing all the commotion, will need to
be modified to address those tremendous "unintended
Okay....so MOST citizens of the United States care very
little about flood insurance.Â Most of us
live in places where it's not required and the liklihood of our homes flooding
is very low, like Colorado.Â Hmmm.Â Florida, however, is a coastal state and what
insurance people refer to as a "donor" state when it comes to the
National Flood Insurance Program (or NFIP).Â
That means that we Floridians pay a LOT more for flood insurance than we
get back.Â In fact, over the last 39
years that the NFIP has been in place, Floridians have paid about FOUR TIMES
more money for flood insurance than they've gotten back in claims.Â Hmmm.Â
Conversely, if you look at Colorado, for example, you'll find the
reverse is true: Â those poor souls who
suffered losses from the recent flooding there have gotten (or stand to get) FAR more money back
from the NFIP than they've paid in (which was likely $0 paid in and estimated
at $2B in damage to be claimed in NFIP $).
So, a little over a year ago Congress passed the
Biggert-Waters Act to "fix" the NFIP, which is in dire straits due to
HUGE claims from Hurricane Sandy and the Colorado floods and other high claim incidents in places where people don't carry flood insurance. Â Not a bad idea.Â But they went about it all wrong!!Â And what's more, FEMA marched out to
implement the law without first providing Congress with the required studies
that would have highlighted the "unintended consequences" that come
along with the current plan.
Â From what I've
learned...we don't need any more legislation.Â
Currently there are 12 million Americans who are REQUIRED, by LAW to carry
flood insurance with their mortgage.Â Of
those 12 million Americans, only TWO million actually carry that insurance
(Floridians are chief among those 2 million because our mortgage lenders MAKE
us carry it).Â That means that TEN MILLION
Americans are required to carry flood insurance but ARE NOT.Â They are "scoffing" at the law and
refusing to carry the insurance they are REQUIRED to carry.Â Their mortgage lenders are not holding THEIR
feet to the fire.Â In fact, I understand
their mortgage lenders are paying fines because they, the mortgage lenders, are
not MAKING them carry the insurance.Â
When questioned, I'm told those mortgage lenders said the fines were so
small, it was easier to pay the fines than MAKE their customers carry
insurance.Â Hmmmm.Â So, if ALL mortgage lenders MADE their
customers carry flood insurance that they are REQUIRED BY LAW to carry, the NFIP
would be solvent.Â Hmmmm.Â Perhaps we just need to increase those fines
and MAKE the mortgage lenders MAKE their customers carry the insurance they are
REQUIRED TO CARRY.Â Â Hmmmm.Â Seems pretty simple.Â We can make this all go away and people in
coastal areas can continue to sell their "grandfathered" properties
until such time as the natural process gets them replaced with
"conforming" structures, built to withstand a flood.Â But wait...that sounds an awful lot like
common sense...I guess it will never happen!!!Â
Soon, however, this will all blow over (at least for now)
and Congress will provide a bandaid to stem the bleeding and Henny Penny will
go home and we'll return to normal....for now.Â Call or write your elected legislators.Â Tell them to fix the problem and MAKE those 10 million Americans carry the insurance the law already requires them to carry.Â I'm paying for my flood insurance, shouldn't they??
Perhaps it is because we have been sold so many things over the years that we did not need. Perhaps it is because some salesmen feel the need to pressure people into buying their wares. Or maybe it's the image of slick snake oil hockers or used car sellers in loud jackets?
Whatever it is, the term "salesman" makes me uncomfortable. I've said it many times..."I am NOT a salesman. I am a Real Estate Consultant". The very word "Sell" carries with it a connotation of getting someone to buy something they do not want or need. Ick!! That's not what real estate is all about for me.
As a Realtor®, it is my purpose to help people find what they want. They initiate the process because they want or need a home. My job is to help them fill that need. But it is never that simple. All too often people are unclear about what it is they really need or want. Often a buyer will start out with a list of "must haves" and a budget that does not support that list. In the process of sorting out this discrepency (are we going to make due with fewer "must haves" or are we going to raise the budget for the purchase price??), it might seem as though I'm trying to "drive up" the bottom line that the buyer had originally identified. I've had buyers ask "how did we get up in this price range, when I specifically said no more than X?". Well, it's easy to say "no more than X" out of one side of your mouth and "I absolutely must have A, B and C" out of the other side. All too often, those two demands or criteria are simply incompatible. I'm usually pretty careful to get it out in the open and phrase it so that it is obvious that there's a contradiction in the buyer's desires and ask, pointedly, "which is more important to you, your must haves or the price?". Again...likely part of my fear of sounding like a chisler, but I want it to be clear I'm here to help, and NOT to drive the price up.
Even with the purchase of my own home, we started out in a price range that was simply unrealistic for the type of house we really wanted to buy. In the end we spent 40% MORE than we started out to spend. But that wasn't my Realtor's® fault, it was the escalating demands that my wife and I put on the "must have" list.
Could I close more deals with some pressure? You bet! But would I feel good about it? No way!! I guess it's all part of my psyche. After all, I spent 26 years of my adult life as an "overgrown boyscout", the term given to Coast Guard Officers. I joined the Coast Guard to save people from the perils of the sea. Perhaps I became a Realtor® to save people from the perils of high-pressure agents or swindlers? Who knows, but just don't call me a salesman!!
If you'd like to consult with me to help you find the real estate you want or need, give me a shout at 305-393-6531 or drop me a line at Jim@OliveKeyWest.com.Â I can help you find YOUR slice of Paradise.
Here's a topic that can really light people up!! Ever try to buy a home, find yourself in a bidding war, battle through it to "victory", only to find out that your "winning" bid was higher than the appraisal? Okay, what next? Clearly the home is worth what you bid for it, because you and six other people who really loved it were willing to pay that much (or maybe even more!!) for it. Any real estate agent will tell you...a house is "worth" whatever a buyer will pay for it. But wait...what if that buyer can't get a loan to actually PAY that amount?
What you WOULD pay, and what you CAN pay are often very different things! The bank, you see, is not going to lend more money than what the MARKET says the house is "worth". That is a different "value" known as Market Value. Market value may be VERY DIFFERENT than what a buyer might be willing to pay if that buyer really MUST HAVE a certain home. Similarly, a seller who LOVES their home and raised their family there may feel the value is much higher than the market value suggests. None of those "values" are wrong. That seller might be in a position to "pay" for what they think the home is worth by simply holding onto it, maybe even with it still on the market, and refusing lower offers as they come along. That, of course, is his or her prerogative. That can be very frustrating for buyers who want the home and know the market value is MUCH lower than the list price, but it's reality. It may also be frustrating for the seller, who is astonished that they can find NO BUYERS who share their view of the worth of their home. Again...reality. As with so many things in life, luck plays a big part in all of this. The seller with the lofty opinion of the value of their home may be lucky enough to find the 1 in 1,000 potential buyers who LOVES the house and will pay the high price. They would also have to be lucky enough that this buyer has the funds to buy the home even when the bank will only lend themÂ half the money. But hey..you never know!!
The appraisal should match the market value of the home. All too often, though, Appraisers don't do a real appraisal, they just make sure the appraisal is high enough to make the loan work. I re-financed a home a few years ago that had a market value of between $300k and $350k. I was only re-financing half that amount, and (low and behold!!) the appraisal came in just above the refi amount, nowhere near the market value of the home. That's one of my pet peeves...if I am paying an Appraiser to appraise my property (regardless of reason), I EXPECT them to give me a reasonable estimate of current market value!! I've seen sloppy appraisals that said the home had a brick driveway or an asphalt roof, when the driveway was really cement and the roof metal...typically the result of failure to change the form they were over-writing. Sloppy!
The bank is really just looking to make sure that they can get back the amount they are loaning on the property in the event they have to foreclose. That's why they have the down payment, as well, it as insurance against the market value dipping below the loan amount. If the appraisal comes in too high...no problem, the bank has a big cushion. But if it's too low you'll have to make some decisions...get a second appraisal (at your additional expense), or make up the difference out of pocket. If you really love the place and you have the means that is an option. For many, it's not an option and can be the source of considerable angst.
While the Market Value should typically be expressed in a range (ie: $475k to $500k), it is a fairly scientific figure with a little bit of "art" thrown in. Where it gets tricky (and often more "artsy") is where there are no recent sales of similar homes to compare with. Very interesting subject, often clouded by emotion, and NEVER as simple and straight-forward as we would all like it to be! But even with all the vague characteristics of a good appraisal, it is definitely something you need to get a solid loan, and therefore a critical piece of the home-buying puzzle. Appraisers are like lenders in that the best way to find a good one is through recommendations from people you know and trust. Real estate agents will be in a better position to recommend an appraiser than most non-professionals, since they deal with them far more often than the average person.
So if you're looking for a good Appraiser in Paradise, or if I can be of any help at all in your Key West real estate quest...give me a shout at 305-393-6531, or drop me a line at Jim@OliveKeyWest.com
I can help you find YOUR slice of Paradise.
Okay, let me start off by acknowledging that not everyone uses an agent.Â I get that, and I could write a whole other post about how misguided I think that choice is.Â There are many people that think they can save money by avoiding the use of an agent.Â On average, though, any money saved in agent commissions is lost in marketing, poor negotiating or just plain lack of knowledge/inexperience.Â So, we'll just agree, for the sake of this discussion, that using an agent (and preferrably a RealtorÂ®) is the way to go.
Teresa Boardman, who has a great blog at RealEstateTomato.com, put it best when she said "Lets face it, consumers believe we all have horns and
a tail and we need to put them at ease and establish a little credibility
before we can earn their trust and their business" That's really sad, but understandable, since there are sleazy people in every community that give that community a bad reputation. Realtors are no exception, but the vast majority of Realtors are just decent people trying to make a living by helping consumers buy and sell real estate. I, for one, believe that if I provide excellent service and care as a primary objective, money will just automatically "happen", so there's no need to focus on the money, but I realize there are some agents who care only about the commission.Â Try to root those people out early in your search.
So, the first rule is to make sure you get a good agent. The second rule is to make sure you are a good buyer(it's a two way street, after all). By entering the arrangement with a negative attitude toward real estate agents in general, you set the stage for failure. Many good agents will refuse to work with difficult customers. I once heard an instructor say "even jerks need a place to live", but not every agent NEEDS to accept them as a client. So, by acting in a negative way, you may end up with a less-than-stellar agent, one who really NEEDS any business they can get. That's not a good place to be, so DON'T BE A JERK!!Â
Remember, agents only get paid when a deal closes.Â So, if a customer engages the services of an agent, views dozens of homes, burns gallons of gas in the agent's car and then decides to use a different agent, that customer has just "stiffed" the agent of any compensation.Â Similar to the waiter or waitress that served your food, there are times when stiffing them on their tip is justified, but usually not something any of us want to do.Â Now, that may be okay if the customer "discovered" that the agent was not someone they want to do business with, but not real cool if they just left because they THINK they can get a better deal by going straight to the listing agent (another myth commonly held by people looking for savings in the wrong places).
A good agent is more like a consultant, working with a client to achieve a good end result.Â And, if you've ever paid a consultant to help you with your business (or whatever), you know it works best when you work WITH that consultant.Â Think of the relationship as a team, working together to win.Â And remember, if you and your agent have a win-win experience, the best part is that SOMEONE ELSE (the seller!) has typically paid for the agent's win, not you! Even better!!
Sometimes buyers can be very impatient, they need to see a listing RIGHT NOW and will not be happy if they have to wait.Â Remember here, that getting into a home is not always easy.Â There are many things that can present obstacles to a short-notice showing...that's not necessarily your agents fault.Â Cut them a little slack and try and get a good sense of whether they are really working hard on your behalf before you get upset.
Remember...in the end how good your agent is, and how good your buying experience is, could easily depend on how good a buyer you are.Â So do your part, work hard at a good relationship with your agent (your teammate!), and do everything you can, as a team, to make a good home-buying experience.Â And, just as importantly...find yourself an agent who will do the same!
If you're ready to be a good buyer, I'm ready to be on your team.Â Give me a shout at 305-393-6531 or drop me a line at JimOlive@RealtyExecutives.com.Â I can help you find YOUR slice of Paradise.
I was recently reminded of my youth, as a young Ensign in the United States Coast Guard.Â I was assigned as the Navigator aboard the United States Coast Guard Cutter GALLATIN:
378 Foot "Needle of Death", High Endurance Cutter GALLATIN
Among my duties as Navigator included providing guidanceÂ during "Swept Channel" Drills.Â Back in the day (WWII), mine fields were used to protect critical harbors.Â A field of mines, just below the surface and out of sight, would be laid at the entrance to the harbor.Â A "swept channel" was created, which was a pathway through the field so that friendly ships can pass without striking a mine.Â Usually the channel was very complex, with lots of zigs and zags so as to make sure an enemy ship couldn't just get lucky and find it.Â That made the channel harder to navigate, and absolutely required precision and expertise on the part of the Navigator.Â One mistake could be devastating!
View of a Minefield from under the surface
It struck me then, how similar the notion of navigating a minefield is to buying or selling a home! Real estate is NOT rocket science. That said, however, there ARE a great many mines that can ruin your whole day if you're not careful.Â Crossing a minefield is relatively easy if you know what you're doing. So, would you rather try it with a little info you read on the internet, or would you prefer to have a highly qualified and experienced Navigator at your side? Much like the target port, which you can see out there in front of you, homes are highly visible on the internet.Â And there's nothing between you and them!!! (or so it seems!) . But that's when things get dangerous and something unexpected happens.Â
So get yourself a good Navigator, or experienced Real Estate Agent (and one who is a RealtorÂ® is even better, since you will know they have agreed to live by a code of ethics) to help you navigate the mine field. And, in the event that you STILL strike a mine (which can sometimes happen even to the best of Navigators), at least you'll have someone there who is also well trained in damage control to help you through it!
If you need help navigating the Key West real estate market, or just want to discuss your options, give me a shout at 305-393-6531 or drop me a line at email@example.com
.Â I can help you find YOUR slice of Paradise!
WeÂ see this question over and over again:Â "Can I ask my agent to share their commission with me to lower the cost of my new home?"Â It's an understandable question, after all, for many people in the housing market, they are facing one of the costliest purchases of their life, and often are faced with the frustration of wanting more house than they can afford.Â Speaking solely for myself, if I'm working with a client that truly needs every little bit of help they can get, I would gladly consider helping them out a bit.Â But bear in mind...that's my money, contractually, morally and rightfully!
Agent compensation is derrived from several factors including:Â Brokerage Firm Expenses, Marketing Costs, Licensing Fees/Costs, Administrative Costs, Referral Fees and Miscellaneous Expenses.Â Let's take a look at all of these:
Brokerage Firm Expenses:
In the state of Florida (and I believe it is fairly standard nationwide), every agent works under the supervision of a single broker.Â That can mean a "brokerage firm" consisting of a lone broker, or one with one broker and 3,000 associates and broker-associates.Â That brokerage firm needs income to exist.Â It's called "overhead" and every business has it.Â It is the money needed to pay the bills.Â Office space rental, lights, A/C, heat, water, etc.Â How do they get that income?Â They take a piece of each agent's income.Â In some firms that takes the form of a percentage of each commission.Â In other firms, it may be a "desk fee" whereby the agent is charged a flat rate monthly or annually to cover their "share" of the expenses.Â Obviously, both of these types of "cost share" can vary.Â It is not uncommon for newer, less productive agents to pay a very high percentage of commission, and 50% is a good estimate for what a "typical" new agent is paying their brokerage firm.Â As the agent becomes more experienced and productive, that percentage typically goes down.Â Desk fees can run the gammut, depending on a lot of factors, but I would be surprised to see any lower than several hundred dollars per month.Â Some agents actually pay BOTH a desk fee AND a percentage of commission.
These are huge!Â A mentor of mine once told me: "You can be the best agent in the world, but if you don't TELL people that, you won't get any customers".Â Very true.Â So, how does an agent get the word out?Â With great expense!Â One might use Trulia.com or one of the competing websites.Â Cost: potentially THOUSANDS of dollars per year, depending on how invested one is in that method.Â Radio ads are good, ad another several thousand dollars per year.Â Search engine optimization...another few thousand per year.Â There is NO LIMIT to what you can spend, other than your budget!Â I know one agent that spends six figures (ie: more than $100,000.00 and less than $1,000,000.00) on his annual marketing budget. My own marketing budget is VERY modest by comparison, but I would venture a guess that the typical agent spends between $5,000 and $10,000 each year on marketing.
In Florida (and most likely everywhere else), an agent has certain costs to obtain and maintain his or her license to sell real estate.Â Initial classroom training, licensing exams, and licenses at the various state, county and city levels cost money.Â For me, that cost was around $1,500 in my first year.Â Continuing education is required to keep my license and that means continuing expense.Â I'm not complaining, I think it is essential to keep real estate professionals current and up to date on laws and trends, especially since we are expected to keep our clients informed.
This factor can be sigfificant because I include in it Association Fees.Â In addition to copier/printer paper required to make sure every client gets a nice "showing sheet" for each property I take them to view, most professionals are members of the National Association of Realtors, as well as their state and local associations. This comes with a pricetag too. It is well worth it, and important for consumers to look for, because it means the agent is a Realtor (a trademarked title) and lives/works by a Code of Ethics. These fees and the cost of paperclips and print cartridges can easily top $2,500 per year for the "typical" agent.
This is another potentially BIG one.Â Often, when an agent is referred by a company or another agent, there is a fee associated with that referral.Â Take, for example, the large national mortgage lender that helps out their clients by referring them to a "specialist" in the area they are buying a home in.Â That company does not do so out of the goodness of their hearts.Â They are extracting a fee (often very hefty) from the agent who gets the referral.Â These fees vary widely.Â In my experience, in particular a VA lender that refers clients to agents, that fee can be 25% or more of the commission.
This is a "catch-all" for things like gasoline and wear/tear on my car from driving clients to endless showings, postage for thank-you notes or thank-you gifts, cell phone and internet expenses (yes, many of us spend extra money to make sure we are "connected" wherever we go so we can do that impromptu internet search while standing in the kitchen of a foreclosed home during a viewing because the client asks about another listing you are unfamiliar with).Â Let's assume the "typical" agent spends around $1,000 annually on this category, though that is probably a very low figure.
It all adds up:
Okay, so let's tally the costs of the "typical" agent:
First there are the fixed costs:
Brokerage firm desk fees: Â Â $ 2,400/yr
Marketing Costs: $ 7,500/yr
Licensing Costs: $ 1,500/yr
Adminstrative Costs: Â Â Â $ 2,500/yr
$ 13,900/yrÂ Fixed Annual Costs
That's nearly $14,000 that an agent spends every year BEFORE s/he sells a single home!
Okay, now let's talk about commissions.Â Most agents work on commission, they "eat what they kill".Â During a slow year (ie: the last 6 years!!) many agents go out of business because there are not enough home sales to go around.Â In some areas there may be as many as 25,000 agents sharing the limited home sales.Â During their first year in the business there are many agents that don't sell anything!Â But, let's use the "typical" figures I've seen.Â The "typical" successful agent closes around one deal every month, or 12 deals per year. In the "typical" US market, the average home price is around $ 146,000.00. Commissions vary and "typically" range between 5% and 8%, we'll use 6% for the purposes of this example, and a brokerageÂ firm percentage of 40%, with a referral fee of 25%.
Purchase Price: $146,000
Commission: $ 8,700
Commission Split: $ 4,350 (each "side" of transaction, seller and buyer's agent)
Brokerage %: $ 1,740
Referral Fee: $ 1,087 (paid to mortgage company who referred client to agent)
Â Net Proceeds to agent: $ 1,523 per "typical" transaction
Â Â Â Â X 12 ("typical" successful agent transactions per year)
Subtract the "typical" fixed costs of $13,900 and the "typical" agent is left with just $ 4,376 for their year's work. Not so good, huh?Â Obviously, most agents need to sell a lot more houses and reduce their fixed costs just to survive. Many rely on the advertising efforts of their brokerage firm (ie: Century 21 national ads) to reduce their individual marketing expense, but that "typically" means higher desk fees or brokerage firm costs. And not every deal involves a referral fee, but many do. Many homes sell for more than the national average, and sometimes agents get lucky and get "both sides" of the transaction. So there are a LOT of variables.Â Though I've never seen official statistics on how many agents "wash out" their first year and go looking for another job, I know the number is high and I've heard as high as 90%!
When you consider how many clients decide not to buy a home after all,Â or to use another agent, there are a LOT of hours expended (ie: wasted) on deals that produce NO INCOME for the "typical" agent.
One should consider all of this and fully understand how an agent is compensated before "assuming" that the agent is getting a big ole fatÂ check for "simply filling out the paperwork" for the client.Â While that "big" commission make look like an easy target to reduce your purchase price, it's putting food on the agent's table, and might not even be adequate to feed their family well. That's not to say the the truly successful agents aren't doing well, but be careful and remember that when we "ASSUME", we often make an "ASS" out of "U" and "ME". And remember, if you've chosen wisely, your agent is a RealtorÂ® with strong ethics who is looking out for YOUR best interests and protecting you from financial harm. How much is THAT worth?
Ah yes, All Hallow's Eve, a time of wonder and joy for the little ones.Â
Â Â A few wee Pirates out in search of booty
But wait, there are a great many adults that savor the opportunity to dress up in costumes and search out tricks and treats, what about them?Â
Well, they all seem to come to Key West.Â Whether for Fantasy Fest in late October, New Year's Eve on Duval Street or just about any other time of the year, it is not uncommon to come across grown people in costumes.Â It is part of the magic of Key West!Â This little island community seems to draw all sorts, all year round.Â Diversity is welcome and tolerance is the mantra.Â It really is a great aspect of this laid-back little enclave in the Caribbean Sea. Having lived in other, less tolerant places, I've seen children teased for not wearing the most up-to-date fashions, or friends fret that their car isn't the latest chic european model, and it can beÂ ugly!Â But not here. Come as you are.Â Some eventsÂ have attire that runsÂ the gamut from black tie to shorts and flip-flops, and neither extreme feels over or under-dressed!Â Here in Key West we welcome young and old, big and small, beautiful and homely, rich and poor.Â Having come here myself as a straight-laced senior officer in the military, I can vouch for the fact that Key West is loved by ALL SORTS!Â I have often told clients that it is part of the charm of the island that a beautiful multi-million dollar mansion sits next to a small dillapidated shack...it just works here. Of course, you could probably buy that shack relatively cheap and turn it into another mansion next door and make a pretty nice profit in the process! Â
So if you like to get dressed up, or sit back and watch others clown around, Key West (or "Key Weird" as it has been called) may be the place for you.Â Give me a shout at 305-393-6531 or drop me a line at JimOlive@RealtyExecutives.com
.Â I can help you find YOUR slice of Paradise.