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California Real Estate Exam: Everything You Need to Know
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Financing is the bedrock of any real estate transaction and commonly, most investors obtain these funds by applying for mortgages from lenders.
However, it is also possible to purchase real property without the assistance of these mortgage institutions or banks.
Cash offers are probably more popular than you think, and this fact is backed up by recent research that shows that about 30% of all home buyers in America paid cash within the first four months of 2021.
If you are looking to get a home soon, this article will help you understand what a cash offer is, who a cash buyer is, some of the benefits of purchasing a property with cash as well as give you insight into how the process works.
The term ‘cash buyer’ is often mistaken for a lot of things; however, buying a house with cash simply means purchasing the property upfront without the assistance of a mortgage or house loan.
This entails that the cash buyer must be able to pay for the property in full without financing from lenders.
Another misconception most people have is thinking you have to show up with a briefcase full of cash to close the deal. The truth is that there is no room for raw cash in the real estate market as no one wants to be stuck counting large wads of cash.
For example, if you are looking to purchase a property worth $500,000 without a mortgage, all you have to do after identifying the property is to make an offer on it.
Once your offer is accepted and all criteria have been met, proof of funds is then presented as evidence of financial stability.
Both parties then proceed to draw up and sign the agreement contract, which would also state that the property is being purchased without a loan involved.
Once this is completed, you are expected to put down earnest money as a deposit for the home while the rest of the money will typically be held in an escrow account to be wired to a title company just before closing day.
Selling or buying a property through a cash payment does come with some benefits over the conventional method of purchasing a property with a mortgage. Some of these benefits include:
When paying cash for a property, investors can save thousands of dollars by waiving closing costs.
Not only do cash buyers get discounts on some closing fees, but they can also avoid excess charges associated with mortgages, like mortgage application fees, and loan origination fees, that make up a substantial part of the closing costs.
Before getting approved for financing from a mortgage institution, a major requirement is to carry out an appraisal of the property by an approved appraisal company, usually, one that is suggested by the lender.
Lenders do this to ascertain the real value of the property and ensure that they are not giving out a loan that is higher than the property value.
The average cost of appraisals ranges between $300-$400 but it can also cost as high as $1200 and traditionally, the buyer pays the fees for the home appraisal because it is required by a lender.
However, since a cash buyer is not working with lenders, he or she is not mandated to carry out a property appraisal, thus enabling them to avoid paying the appraisal fees.
One of the significant advantages of purchasing a property with cash is the absence of loan contingencies in the transaction.
This is a security, especially for the seller as no clause entitles the buyer to a refund of any money spent during the transaction process.
Therefore, the buyer is most likely to see the transaction through because the transaction is independent of mortgage approval and the buyer would not want to lose any money by forfeiting the deal.
Another important benefit of cash transactions in real estate is the elimination of interest payments associated with loans. Due to the fact that the buyer is paying for the property out of their pocket, they are not required to make monthly mortgage payments afterward.
Consequently, the issue of paying high interest on borrowed funds is removed. This, in turn, could potentially help the buyer save a significant amount of money in the long run.
Real estate investors opt for cash transactions when buying or selling a property because of the lesser time it takes to close the deal.
Typically, the closing process when you purchase a home with a mortgage can take over a month to be finalized. This is due to activities like obtaining mortgage pre-approval, underwriting, and other time-consuming steps of the home-buying process.
However, the reverse is the case when you purchase with cash as it is possible to close on a deal in as little as a week or two.
This in turn makes the process very convenient and saves both the buyer and seller ample time and money.
Selling a property directly to a cash buyer simplifies the transaction process, reduces the hassles faced by both buyer and seller as well as limits the number of individuals involved in the entire process.
Because the buyer does not work with third parties like lenders and appraisal companies, there is no complex chain to work through and an even lesser risk of complications.
This is perhaps the most important benefit of paying cash for a property as the buyer is not encumbered by a mortgage.
Hence, the buyer does not have to worry about fluctuating housing market trends, increasing interest rates, or losing the property to foreclosures so long as all payments, such as property taxes, are made on time.
The process of purchasing a property with cash is relatively straightforward. After securing your funds and drawing up a practical budget, here are the next steps to take when buying a property with cash:
The next step is to select a suitable property within your budget that caters to your specific needs. When choosing a property, ensure to carry out due diligence, taking a look at the location of the property, other surrounding properties, title search, previous transaction history, and any other document of importance.
As soon as you have chosen a suitable property and done thorough research, it is time to create and submit a compelling offer to the seller. This is a crucial aspect of the procedure and should be handled with expertise.
It is therefore advisable to work with a professional and experienced agent to improve your chance of getting selected. Once your bid is chosen, negotiate with the seller and agree on the price to be paid.
As soon as a price is agreed upon, proof of funds or a financial statement is obtained from your financial institution and presented to the seller, stating that you are in good financial standing and have enough money to put in a cash offer.
You are also expected to put down a holding deposit or earnest money which is typically 1-3% of the total price to secure the property and show commitment.
A legal agreement that outlines the terms of the transaction is drawn up and signed by both parties. Regardless of whether you are purchasing a property with cash or a mortgage, it is important to employ the services of a solicitor to handle all legal affairs related to your property.
Once all the necessary inspections have been carried out and contracts have been signed, you will transfer the full outstanding payment for the property purchase to a title company just before the day of closing.
After the final house inspection is performed, it is time to finalize the deal. Closing a cash deal is quite faster and only requires you to come with a means of identification i.e a government-issued ID card, a cashier’s check or wire transfer for the payment of purchase price, and all other necessary documents.
Once payment is completed, there is a legal transfer of ownership of the property to the buyer and this signifies a successful end of the transaction.
Purchasing a property with cash is one of the appealing avenues investors use to acquire properties as it not only makes your offer more appealing but it also speeds up the closing process and helps you save money in the long run.
However, just like any other transaction, it is important to carry out thorough research to understand what buying a property without mortgage entails. It might also help to discuss with a professional, such as a real estate agent or lawyer.
If you think being tough will win you more negotiations, then you are putting yourself at a huge risk of losing your next deal. Contrary to this belief, a more empathetic approach can lead to better outcomes.
Mastering the art of negotiation involves a blend of empathy, strategy, and smart tactics that go beyond mere assertiveness.
Here are 10 surprising negotiation tips that can help you close more deals and build lasting relationships with your clients.
Effective negotiation starts with understanding. By actively listening to your clients and the other party, you can uncover their true needs and motivations. This not only builds trust but also provides valuable insights that can be leveraged to craft mutually beneficial agreements.
During a listing appointment, instead of immediately presenting your marketing plan, ask the seller about their goals and concerns. By listening attentively, you discover they prioritize a quick sale over maximum profit, allowing you to tailor your strategy accordingly.
Knowledge is power. Research market trends, comparable property values, and the backgrounds of all parties involved. Being well-informed allows you to present compelling arguments and anticipate potential objections, giving you a strategic advantage during negotiations.
Before negotiating an offer on a property, analyze recent sales in the neighborhood. Presenting data that shows similar homes sold for less can help justify your client's offer and persuade the seller to accept a lower price.
Establishing a genuine connection with your clients and counterparts can create a positive negotiating environment. Simple gestures like remembering names, showing genuine interest, and maintaining a friendly demeanor can make the other party more inclined to work with you.
At the first meeting with a potential buyer, take note of their hobbies or interests. Later, mention something related, like a local event or a favorite restaurant, to strengthen your relationship and make negotiations smoother.
Before entering any negotiation, define your goals and establish your limits. Knowing what you want to achieve and where you can compromise helps you stay focused and make informed decisions, ensuring that you don't concede too much too soon.
When listing a property, decide in advance the minimum acceptable price and your ideal listing price. This clarity helps you confidently negotiate with buyers, knowing exactly when to hold firm or make concessions.
Understanding and managing emotions—both yours and the other party’s—can significantly impact the negotiation process. By staying calm and empathetic, you can navigate tense situations more effectively and keep the conversation productive.
If a buyer becomes frustrated during price discussions, acknowledge their feelings and address their concerns calmly. This approach can de-escalate tension and lead to a more constructive dialogue.
Silence can be a powerful negotiating tool. After making a point or presenting an offer, pause and give the other party time to respond. This can encourage them to share more information or make concessions without feeling pressured.
After presenting an initial offer, remain silent and maintain eye contact. The seller may feel compelled to fill the silence by revealing their bottom line or making a counteroffer.
Offering a range of solutions provides the other party with a sense of control and increases the likelihood of finding a middle ground. Presenting multiple options also demonstrates your flexibility and willingness to work towards a mutually beneficial outcome.
When negotiating closing dates, offer the seller a few different timeframes to choose from. This flexibility can make the seller more willing to agree to your preferred terms on other aspects of the deal.
Negotiations can take time, and rushing the process can lead to suboptimal deals. Patience shows your commitment to finding the best solution, while persistence ensures that you stay engaged and focused on achieving your objectives.
If a buyer is hesitant about a property's price, avoid pushing for an immediate decision. Instead, give them time to consider and follow up periodically, demonstrating your dedication to helping them find the right home.
Not every deal is worth pursuing. Recognizing when a negotiation is no longer viable and being prepared to walk away can often prompt the other party to reconsider their stance and come back with better terms. This demonstrates your confidence and reduces the likelihood of settling for unfavorable conditions.
If a seller refuses to negotiate below a certain price and it exceeds your client's budget, politely decline and inform them you’re willing to explore other options. This may encourage the seller to lower the price to keep the deal alive.
After the negotiation, maintain open lines of communication. Following up reinforces relationships, addresses any lingering concerns, and keeps the door open for future opportunities. A thoughtful follow-up can turn a successful negotiation into a long-term partnership.
After closing a deal, send a thank-you note and check in a few weeks later to ensure everything is going smoothly. This gesture can lead to referrals and repeat business, enhancing your reputation as a reliable agent.
Negotiation doesn’t have to be a battle of wills. By using these surprising tactics, you can approach each deal with confidence and a fresh perspective. It’s all about connecting with people, staying flexible, and thinking strategically. When you focus on understanding your clients and the other party, you’re setting yourself up for not just more deals, but better relationships too.
Here’s the secret sauce: Keep learning and stay adaptable. The real estate world is always changing, and the agents who thrive are the ones who keep growing their skills and embracing new strategies. So, stay curious, keep honing your negotiation game, and watch how these tips help you stand out and succeed in your real estate career.
As a real estate agent, the most important thing you have to do when deciding to work with a seller gets the residential listing agreement signed. As a general rule, you should not start working with a seller without first having them sign this document.
This is important because listing agreements are the contractual document that binds a real estate agent with a homeowner. This agreement outlines terms in which the agent helps the homeowner find a buyer to purchase their property and commission to be received.
In real estate, there are three common types of listing agreements. Each is different and how you get compensated as an agent, depends on which agreement you use with your seller.
This article will help you become more familiar with the three different listing agreements and in what situation they may be used. Understanding how they function will bring you more success in your career as a listing agent.
So, let’s get started.
The first type is the “exclusive authorization and right to sell” agreement. With this agreement, you’re the only one who has the right to sell this property. You alone represent the seller. It is the most secure agreement regarding representation and compensation.
So, how do you sell this house if you have the exclusive listing? How do you get the most exposure to get this listing sold?
The best method to use is to put it on the MLS, which is the Multiple Listing Service. This is an online database that real estate agents use to search for properties for their buyers.
Typically, the seller agrees to give you 6% of the sales price as the listing agent. When you list your property on the MLS, you offer to split your commission with the buyer’s agent at 3%. The buyer’s agent becomes the cooperating broker.
With an “exclusive authorization and right to sell”, there is no getting around paying the agent’s commission. It guarantees that you will earn a commission if the property gets sold, regardless of who brings the buyer into the transaction.
If a random buyer knocks on the seller’s door or contacts them on social media, you’re still the only person authorized to sell this property. So you earn your commission because of the compensation structure of the agreement.
This is the most common listing agreement used, the one that forms the strongest bond with the seller and guarantees compensation to the agent.
The second type is called the “exclusive agency” agreement. This means your relationship to represent the seller is exclusive to you only. There is one major difference between this and the “exclusive authorization and right to sell” agreement.
The most important phrase missing from this agreement is “right to sell.” With this agreement, there is a little more risk when it comes to getting paid. This will directly affect you receiving a commission if you are not the one who brings a buyer to the table.
With the “exclusive agency” agreement, the “right and authorize to sell” extends to the homeowner. In this scenario, the seller actually has a financial incentive to find a buyer. If the seller secures a buyer, the seller does NOT have to compensate you.
Let’s be clear. This does not refer to a buyer who is represented by an agent. An agent knows that if they have an offer from their buyer that they must present it to the seller’s listing agent.
Some sellers hesitate about having to pay a real estate agent when they believe they can find the buyer themselves. While this is not the optimal listing agreement to use, this can be useful in cases where the seller is doubtful about listing with an agent.
You can present this Exclusive Agency as opposed to not getting the listing at all. With this agreement, the seller feels comfortable knowing that if they find the buyer they will not be obligated to compensate you.
This agreement has the most risk when it comes to compensation and commitment.
With an “open listing” the seller is not committing to one agent. In fact, it’s the opposite. The open agreement allows the seller to engage with multiple agents.
Basically, the seller is saying that they will entertain and compensate any offer from any agent who brings them the buyer. That means you are competing with multiple agents with no guarantee that you will get paid for your time and effort.
If the market is hot, sometimes an agent will take the risk on an open listing agreement in hopes that they will find a buyer before anyone else. But like we mentioned before, there’s no guarantee that they will receive a commission if another agent finds a buyer first.
So why would a SELLER want and agree to such an arrangement? In some cases, an “open listing” would be attractive.
The seller wants to increase the chances of getting the home sold in a short period of time by having more agents looking for a buyer.
The seller believes they have a property that is high in demand. They will choose to have an “open agreement” to negotiate better terms and pay less in commission.
As a real estate professional, your time and expertise are valuable. The “open listing agreement” is not the best contract to use as a general rule.
Overall, the “exclusive authorization and right to sell” agreement is the ideal contract to have your clients sign. It secures your agency with the seller and guarantees your commission when the property is sold.
The “exclusive agency” and “open listing” agreements, while valid, have some definite drawbacks. They do not secure your compensation. You want to ensure that you get your commission if the house sells.
If you’re going to put your time, effort, and money into marketing a property, it’s definitely best to make sure you’re going to be rewarded for your investment. Evaluate the market, weigh the risk and use the best listing form whenever possible.
Like many other markets, the real estate market goes in “peaks” and “valleys” where property values are very high (the peaks) and very low (the valleys); this is done in a repeating cycle. Now, most readers will likely remember the Great Recession of 2007-2009 when all the property values were in the toilet, people were being foreclosed upon left and right, and people were desperate for buyers for their homes.
Now, this may sound like doom and gloom to you, but it’s not always a bad thing if you play your cards right. However, many agents were too scared in the recession, and got out of the business for more secure, 9-5 jobs that paid a consistent wage. Some agents, like Robert and Carolee Rico, did not let the state of the market discourage them - they just pivoted and changed their business model.
The real estate life cycle follows a pattern that is caused by four phases:
Before the recession, values were going up, houses were selling quickly, and it was easy to buy a home for the first time or “upgrade” to a bigger home. This was an increasing market, and it was extremely lucrative to go after sellers, because listings were the guaranteed source of income and it was easy to sell a home. This led up and up, eventually leading to the market peak, where values hit their high and started to decline. This meant that people were “upside down” on their houses, which means that they owe more on the loan, than what the house is worth. Therefore, many people stopped making their house payments and allowed the lender to foreclose on them, or take the property back. This kicked off an enormous recession, the biggest in the US since the Great Depression.
In a recession or depression, the supply is high, and the demand is low. This drives down value, due to basic economic theory. People are unable to pay their bills, due to low demand for their services or labor, and not making enough money. So how are people supposed to buy a house?
Well, one of the facts of the Great Recession was that there were certain sectors of the economy that were actually doing well - and these people were some of the few with money and liquid assets during the Recession. They were able to buy houses, and they were able to get some killer deals on them too! Some Real Estate Agents thought, instead of focusing on the scarce seller’s market, why not focus more on the buyer’s side and help the buyers out there, find the home of their dreams at a steal of a price? The inventory was ample and, although much of the homes were damaged from deferred maintenance, they were mostly restorable through some construction and labor efforts.
As the market slowly recovers, usually through some sort of government intervention, the general public has a little more money to spend and can consider purchasing homes again. At this point, it’s still very good to be a buyer’s agent, but there are going to be a few more listings coming on the market. People are always going to need to sell their homes, and as the market recovers, more and more people will want to sell their homes as well.
The drawback to being a buyer’s agent, of course, is that it’s much more active work (day to day) than being a seller’s agent. If you’re a seller’s agent, once you’ve put the home on the MLS and set up the advertising, you can take days off and just be available on your cell phone! If you’re the buyer’s agent, however, you are going to be more active -- looking for new MLS listings, driving the neighborhoods looking for FSBOs, and communicating constantly with your buyers.
After the market has recovered a little bit more, it will bypass a certain threshold, and the market will now be in “expansion” mode -- when the economy is growing. This means that more construction will start, and the existing housing will be fuller. This raises values, which means it’s becoming a better and better time to be a seller’s agent. More and more people will want to sell, so you can secure listings and earn income in a reasonable manner. If it’s a quick expansion, near the top of the market, home values will soar because the economy is strong. People want to buy homes because they think values will keep increasing, but homeowners want to hold onto their homes for the same reason. At the top of the market, there is very constricted inventory, and a high amount of construction, but a shortage of available homes.
Once all the new construction comes available, the market will stable out for the most part -- rents will fall a little from their peak, and values might go down slightly, but for the most part there is a market equilibrium where supply meets demand and everyone is content. However, the downside is that with the new construction, old buildings become less desirable and rent falls on them.
So... the cycle continues... Once rent starts to fall on the older housing stock, rents start to fall in general, and then (due to the cyclical nature of the market) the market begins to trend downward, until it hits the tipping point and starts another recession. As we said, what do we advise you do in this time? Become a buyer’s agent!
Standing out as a real estate agent simply means being prominent, distinct, and capable of getting potential clients to see what you are capable of as an agent. Standing out is very important because it not only makes you well-known but also gives you an advantage over your competition and establishes your place in the vast real estate market.
Fortunately, standing out from the crowd is not as difficult as you might make it out to be. Here are some practical tips that you can work with to achieve this goal:
A real estate niche is a specialty or area of the market you choose to focus on. The most flourishing real estate agents are not jacks of all trades. Instead, they focus on just one market niche and build a name for themselves in it.
Initially, choosing a niche might seem counterproductive as you might feel you are restricting yourself. However, when you are specific about the kind of services you provide, it allows you to focus your time and efforts on mastering your chosen niche and also gives potential clients the confidence that you are an expert. This immediately stands you out from other real estate agents in the area.
When choosing your niche, ensure to:
Social media is one of the most effective marketing tools to help you distinguish yourself in the real estate market. The benefits of social media to every business including real estate can not be understated. Research has shown that the majority of home searchers begin their search online and what better way to put yourself in their way than through online platforms.
Social media and other online platforms help create more awareness for your agency and broaden your reach to potential clients. It also allows you to build meaningful connections with your customers, thereby giving you an idea of what your customers want and how to best serve them. Furthermore, it helps you stay on top of the latest trends and provide fast services to your clients.
Optimally maximizing social media will not only build you a strong reputation in the market but also give you a great advantage over your competitors. There are various effective ways to grow your online presence such as:
It is essential to give the right information regarding investing in real estate to your clients without sounding unrealistic or too negative. Learning to communicate properly to your clients by explaining the potential gains, possibilities, and obstacles they might experience helps them to adjust their expectations of the market going forward.
This will not only prevent them from making costly mistakes but also help to maintain a good agent-client relationship hence, improving your reputation.
Nothing captures people’s interests like originality, and believe it or not, incorporating uniqueness into your brand will help you stand out. Being authentic leaves a strong and lasting impression on your clients and this will keep your customers thinking and coming back to you.
Take time to identify your strengths as a person; study the things you enjoy and excel at and at the same time, research your competitors to find gaps in their services. Then work towards developing a unique approach that will fill these gaps accurately.
Being unique also includes having a unique selling proposition -a message that shows potential clients what differentiates your brand from your competitors. This is more than just special catch-phrases, services, and incentives. It is one thing that will make your brand stand out, and you should put some thought into developing it.
The real estate market is a very competitive field, and if you are hoping to succeed in it, then you are going to need advertisements and promotions targeted at reaching your potential customers and creating tangible avenues for your customers to relate to your brand.
Utilizing creative pieces to promote your brand distinguishes it from the rest and captivates the attention of your target audience until they finally choose to work with you. In addition, it can help you amass a fanbase, as studies have shown that many people believe that a brand is high-quality based on how good its advertisement is.
You can creatively promote yourself in the real estate market by:
Community leadership is simply working towards a common goal with the welfare of a specific group of individuals in mind. A community leader tackles the problems and rising issues while serving as a representative for this group of people.
Thriving real estate agents understand the importance of being problem solvers in their communities. Activities like volunteering, organizing, donating to or sponsoring community events, not only open you up to meet more people but also help you create a good reputation for yourself and long-lasting relationships within the community.
By becoming someone the community recognizes to provide leadership and solutions, you establish yourself as someone they want to work with and this naturally makes you stand out in the market.
The advantages of establishing a name for yourself in the real estate market can not be overemphasized. Not only does this expand your clientele base and help you forge lasting networks but it also creates a wide margin between you and other agents within your region.
While everyone can stand out in the real estate market, it takes effort, strategically positioning yourself within the reach of potential clients, and smart planning to do so.
Transferring property after someone is deceased doesn’t have to be difficult. There are 4 common ways a property deed is transferred:
Without written instructions on what to do with a property after someone is deceased, the property owner could be contested. In these scenarios, the assets will be divided out in probate court, which is a long, arduous process that nobody enjoys.
This article will help you understand the ins and outs of transferring property when someone is deceased and break down the common terminology you’ll see along the way.
First, let’s start with deeds.
A deed refers to a legal document with which the holder can lay claim to ownership of real estate or other assets. The deed is used to transfer asset title to a new owner.
Real estate transactions see the deed handed over at closing, and a valid deed must have certain elements depending on the jurisdiction. These include:
Deeds vary, and as a result, they would feature various warranties of title. Common deeds include:
In order for a property owner to sell, refinance, or obtain a line of credit on a property, there must be a record of such deed with the local government. The title insurance company or buyer’s attorney usually handles this part of a real estate transaction.
The document in itself as well as the transfer of title is valid, however, in the event of legal issues, the only way to avoid a delay would be to have related paperwork be on file alongside the register of deeds.
The following features are required of a deed:
A deed and a title chiefly vary in the manner in which they exist.
A deed is a legal document that clearly states that the holder legally owns property or owns the title, and then intends to transfer both title and property to a new owner.
A property title on the other hand is an intangible concept with no physical documentation. It refers to theoretical rights that a homeowner holds to a piece of real property. It is the deed that holds a public record showing the property owner’s title.
The rights that can be accessed via a title may vary on the basis of the deed. Clear title vests absolute ownership rights in the titleholder, however, the title’s validity present in the deed can still be contested based on any of these two factors:
Homeowners may opt to hold title in several ways, and this may in turn impact how ownership rights can be transferred in the future. Here are the most common ways:
Sole ownership sees a single owner to the property title. This holding method commonly applies to single individuals, legally divided Ed individuals, married individuals looking to acquire property separate from their spouse (there may be restrictions based on the jurisdiction).
Joint tenancy sees two individuals purchase a property together and hold equal shares in said property. Since joint tenants have equal rights, decisions made about the property must be done unanimously.
In addition, rights of survivorship may be included here which allows the surviving tenant to assume ownership of all shares upon the passing of the other tenant.
Co-owners of a home have equal rights in the home to use the property for the duration of their lives. However, they hold title to their share of the property individually and can choose to will away or dispose of their individual rights.
There is no survivorship option here and no tenant inherits the rights of the other. Rather, ownership becomes vested in the decedent's heirs upon the death of either owner. This is where the difference between joint tenancy and tenancy in common lies.
This tenancy type is especially for married couples and regards the couple as a single legal entity with property rights shared and undivided. The right to survivorship applies here, and before one spouse can take any action on property, the other must approve. This tenancy type may be found in all states.
This form of title holding, sometimes known as marital property, implies that spouses acquire property during marriage and have the shares split evenly between them. Either spouse can choose to transfer their ownership share or will it however they want.
A living trust sees the trust or title holder maintain ownership rights to real estate property until they die or become incapacitated. This then sees an appointed trustee assume property management and control.
An irrevocable trust ensures that the terms of the agreement cannot be modified and the titleholder basically transfers their ownership rights into the trust. A revocable living trust permits the tile holder to alter agreement terms when they are still alive and their mind is still sound.
Probate refers to the legal process that reviews the will to ascertain validity and authenticity. It may also encompass the entire process of administering the estate of a deceased person without a will or a deceased person’s will.
Following the death of the asset holder, an executor (if the deceased had a will) or administrator (in the absence of a will) is appointed to administer the probate process. It mainly involves a collection of assets to pay off liabilities and then distributing what is left over to beneficiaries.
The probate court usually reviews findings and is the final ruling on how assets should be divided and distributed amongst the recipients. Probate provides protection especially when the deceased did not leave a will.
Transfer of deceased real estate may involve a pretty extensive process depending on how the title was held. Probate might be necessary except for when:
In the event that the deceased held the property in a trust, the most updated deed would indicate that the trustee of the trust had the property transferred to them.
If a transfer-on-death deed was filed by the deceased, the deed would specify the property’s new owner. There would be the need for some paperwork including filing a death certificate copy and an affidavit with the county’s land records office.
In the event that a surviving co-owner inherits, while rules may vary from county to county or even state to state, it is general to have the surviving co-owner file a statement detailing that they are the new sole owner. They would also file a death certificate, all in the county’s land records office.
Using a trust or will rests on certain factors. For instance, a will might be great for small estates with assets that are easily transferable and simple bequests.
Similarly, having a trust without a will might result in problems when it comes to assets not covered by the trust which become subject to intestacy laws. In other words, larger estates may be better off using both.
A trust administration has no waiting period which implies that beneficiaries have easier and speedier access to assets left behind. A trust also provides a firmer control for determining how your assets are distributed more than a will would.
At the end of the day, your choice of will or trust or both should be determined by the size of your estate, tax considerations, age and capabilities of heirs, as well as bequest complexity. To ensure that everything moves smoothly, it is essential to carry out thorough planning.
Transferring property is done in various ways and various factors affect how it can be done. The major factor is how the property is owned or ownership type. Beyond this, understanding how the entire process goes is key, and if it gets too much at any point, you can always engage the services of an expert to guide you.
A real estate property lien is a claim against a property to secure debts. The property is used as collateral to compensate the debts if the owner is unable to pay the debt owed.
This information is crucial to know especially if you are an agent. A listing that has a property lien will directly affect how you are able to market and sell the property.
There are three common types of liens and each one has a unique role on a property owner's land: mechanic's lien, voluntary lien, and involuntary lien.
The mechanic’s lien. The name can be misleading. It does not refer to the common definition of someone who fixes cars. But it is related to someone who fixes your home.
This can refer to someone who put a pool in the backyard or a contractor who did remodeling in the house or major construction. The person who has made the improvements is referred to as a “mechanic.”
So what happens when the owner decides they are not going to pay the person who has done the work on the home? The worker can place a mechanic’s lien on the property in an effort to get paid.
This can get this done by going to the county recorder’s office. The mechanic’s lien gets filed and added to the property. If the lien gets approved, it will also be added to the title.
This is important when it comes time to sell the property. Buyers will not be as interested in a home that has a lien on it.
A voluntary lien is when the owner agrees to have the lien placed on the home. They volunteer to accept it. It sounds counterintuitive to the property owner’s interests. So under what circumstance would, the owner agree to a lien?
One example of a voluntary lien is a mortgage.
A mortgage is a lien. In this case, the lender puts a lien against the property’s value. Having the bank place a lien on the property as a mortgage, allows the individual to borrow the money against it to purchase the home.
A mortgage gives the individual the advantage of homeownership. Since they would benefit, they are more inclined to voluntarily accept this type of lien.
Another example of a voluntary lien would be a home equity loan. The owner is borrowing money against the current worth of the property.
These are liens that homeowners do not want and are unwelcome. They are placed by other parties against the homeowner in an attempt to collect fees or compensation. Here are some examples that would fall under this category as an involuntary lien:
One common example of an involuntary lien would be a tax lien. If you don’t pay your federal income taxes, the government will place a tax lien on your house. This also includes property taxes, special assessments, and state tax liens.
The mechanic lien is also considered an involuntary lien because it’s initiated by a third party. As discussed earlier, it’s filed by a worker or service provider. The file to receive compensation for work completed and the homeowner refusing to pay.
If a homeowner has an unpaid debt to a creditor, the creditor can file a judgment lien. A judgment lien can also be created when someone wins a lawsuit against you and records the judgment against your property.
Ideally, you don’t want to list a home that has any liens on it, because that can be seen as a negative to potential buyers. But that doesn’t mean you have to refuse the listing.
As an agent, it’s important to know if a property you are about to list has liens taken against it. You can find this information by having your title representative pull a preliminary title report for you.
This preliminary title report will give a full history of the property. It will include information like the names of the previous owners, the current mortgage amount, and when the property was purchased. Along with this information, you will find any liens currently on the home.
So what happens if you do find liens listed on the property?
If the liens are voluntary, there are usually no issues when it comes to selling the home. When the property sells, the owner will pay them off with the profit of the home. Again, the most common examples of a voluntary lien would be a mortgage or home equity loan.
If the liens are involuntary, the seller has to address them. Whether it’s paying it off or coming to a settlement, sellers will want to get that lien cleared before putting it on the market.
It’s inevitable, some of the listings you’ll take in your real estate career will have liens on the property. While not all liens are negative, it’s still important as an agent to know and understand the difference between the two.
The preliminary title report will be instrumental in accessing the home’s history and letting you know about current liens on the property. If you are working with the seller, you can communicate which liens need to be addressed with urgency.
This knowledge will ultimately help in getting the property sold with no issues, leading to a happy client and another closed escrow.
Becoming a real estate appraiser is an exciting career choice.
Appraisers help determine the value of real estate.
They work closely with agents, investors, banks, buyers, and sellers to identify the value of a specific property or home. This helps entities find a fair value of the real estate to sell it at the right price.
Becoming a real estate appraiser requires time, effort, and studying. However, once you become an appraiser, you will find the work was worthwhile.
To become a real estate appraiser, there are 9 steps you must meet:
You must be at least 18 years of age to be a residential real estate appraiser. An associate's, bachelor's, or doctorate degree from college or university is not required. You can be fresh out of high school and ready to dive into appraisal studies. A real estate appraiser is a great career option if you enjoy houses, report writing, and numerical analysis.
As with many real estate jobs, there are prerequisite courses that must be completed before you can take a State Exam. To become a real estate appraiser, the state of California requires you to pass 150 hours of appraisal courses. Following these classes is a live proctored exam. You get 3 attempts to pass this exam. If you do not pass within those 3 attempts, you are required to retake the prerequisite courses.
After you have completed your exam, you can apply for your license. Applications are sent to the Office of Real Estate Appraisers (OREA). You need your application (one of the RE forms available on the Department of Real Estate’s website), certificates of completion from your prerequisite courses, and payment forms or checks. This process is similar to your real estate (salesperson) exam application.
After their waiting and verification period, the OREA will issue a date for your initial Appraisal License exam. Along with this, you are requested to send in a Live Scan. A Live Scan is a fingerprint and background check. Once you have completed these requirements and sent in the verification, you are ready for your exam.
Sharpen your pencils–it's time for a test! After you pass the exam, you have one (1) calendar year to pass the exam, pay any additional fees, and get your real estate appraisal license. However, this does not mean that you can appraise independently–yet. At this point, you have to find an established appraiser who is can train you. Additionally, they cannot have trained three (3) real estate appraiser trainees prior to you.
When you find an appraiser, you must accompany them on inspections and assist them in writing reports for at least 2,000 hours. That’s 40 hours a week for 50 weeks, which equates to one year of full-time work. During this time, a Supervising appraiser must review and approve your work. This does not mean it has to be the same appraiser every time. It is possible to get experience at two separate firms.
Tip: Choose an experienced and reputable appraiser as a mentor to build industry connections and gain valuable insights.
After 2000 hours of experience, you can become a certified residential real estate appraiser. This is where you can work for yourself, control your schedule, and income. Most appraisers are self-employed. Therefore, there are more certified appraiser than there are trainees. Your Certified Appraiser (the one training you) must approve your 2,000 hours of work, which includes the quality of your work and your work ethic.
You can apply for your residential real estate appraiser license when you have received supervisor approval, practiced report writing, and practiced appraising. You are then eligible to complete your application and send it to the OREA and wait for the department's response.
After you get your license, you can file with banks, loan reps, and more. This will allow you to receive requests for jobs. If you follow the typical appraiser’s business model, you will be self employed. Therefore, you will have to market your service and prospect for leads. Unlike a real estate agent, your target market is not the consumer. You will have a different marketing strategy than typical agents or title reps.
It typically takes 1-2 years, depending on your state's requirements and how quickly you complete coursework and experience hours.
The average salary of a real estate appraiser varies by state and experience level. According to industry reports, certified appraisers earn $60,000 - $100,000+ per year.
Yes! Appraisers enjoy job stability, flexible work schedules, and the ability to work independently. It is a lucrative career path with opportunities for growth.
You will be churning out reports on a weekly basis and, hopefully, getting multiple jobs a week. Once you are “on the list” with a lender or bank, you are will be more likely to receive passive work. It is a facet of the real estate industry that operates heavily on trust capital and experience. This is why it is helpful to do your 2,000 hours with a professional, profitable, and busy appraiser–your name gets in front of the right people even before you are licensed.
This job path requires a big time investments. At first, it can seem daunting. You have to spend more than year studying and training for the chance to become a real estate appraiser. But, when you apply yourself and do the work well, you will achieve your goal. And, when you do, you will realize what a terrific decision it was.
Think about today’s world versus the world of 20 years ago. Everything is different now due to the technology that we possess in our palms and pockets. Make sure to use this technology wisely and meticulously, given that we are all so bombarded with online advertisements. It’s tough to stand out from the pack unless you’re really putting work and dedication into it!
The digital world makes life so much easier for so many people, in so many ways. Just one example: instead of getting in your car, walking around the grocery store, and shopping for your own food, now you can do all of the shopping on a laptop or phone from the comfort of your couch, and the groceries get delivered right to your door!
That’s great for people that want to do less work, but imagine if you were disabled -- this would literally be a life-changing development.
Back in the day, marketing yourself required legitimate legwork - walking to houses, knocking on doors, canvassing neighborhoods, and more.
It was tough, it was grueling, and it was costly - both in time and money. But, it started conversations with people -- and conversations are what led to business.
Nowadays, though, situations have evolved. With the advent of the digital world, interactive websites and apps, and unfathomable computing power in your pocket, marketing has completely shifted tracks to the digital world. The younger generation tends to be much more accepting of digital advertisements and digital/online personas, but also more skeptical and judgmental of the content they see online.
That’s why it’s absolutely key to be authentic and genuine by posting engaging content and promoting/advertising with posts that naturally encourage people to interact.
Marketing yourself digitally also has many more components than old-school, traditional marketing. Whereas with traditional marketing you’re simply selling yourself as an agent; when you’re selling yourself digitally, you’re selling your products, yourself, AND how well you can put together an online presence.
One great thing about digital marketing compared to in-person marketing is that you can do it from anywhere - be it your office, home office, or even your bed!
Of course, we’re not suggesting you work from your bed (it’s not great for work/life balance), but in a pinch, sometimes you need to. You can also do a lot more productive work by spending time and money on promoted posts, rather than spending the same time and money driving through neighborhoods and knocking on doors where nobody’s home.
Especially with a listing, digital marketing is king -- you can post pictures, describe the home, put your contact info, and more, all within one post online!
However, there’s something to be said for the in-person marketing angle. Humans, by nature, are social creatures. This means that we are programmed to LIKE interacting with other people. Sharing information and experiences are all key to forming a strong bond with clientele. When you’re in person, networking, and actually shaking hands, you form a stronger and quicker bond than if you are competing for their attention online (with everyone else’s ads competing with yours for eye space and brain space).
So what should you do now to make yourself the most successful Real Estate Agent? We definitely recommend -- can’t stress enough -- that you do both online and in-person marketing to make yourself successful.
While everyone expects you to do online marketing, people will be surprised that you went above and beyond to do in-person, traditional marketing. Judge the neighborhood, but door-knocking and traditional cold calling are surprisingly effective! Connecting is super important in this industry. Instead of just making someone’s life easier with your digital marketing, make it better through your traditional marketing.
Competing with others to be the absolute best is in our blood - it’s survival of the fittest. This drive pushes us to become better than the people with whom we surround ourselves.
When it comes to being a successful Real Estate Agent, it’s easy to be overwhelmed with the competition.
Competition isn’t just the drive to push us further, but a tool to measure our own success. However, we forget that competition isn’t always good. Being competitive is destructive to our own self-worth.
The secret to being a successful real estate agent isn’t by competing with others, but rather it’s competing with yourself.
In real estate, you might consider yourself successful if you’re making $50,000 a year, but someone else might consider yourself successful when making $150,000 a year. Everyone has their own definition of success. This is because people have goals that are unique to their own ambition.
If earning $150,000 a year isn’t important to you, then you shouldn’t let the number of yearly earnings define your success as a real estate agent.
Taking time to consider how you define success is important to your growth as a real estate agent. If you want to take your career in real estate seriously, then you need to be honest with how you measure your growth. Defining success for yourself is the first step in becoming the agent you’ve always wanted to be.
Everyone has their own level of success, therefore you can’t compare yourself to others.
Being competitive is the fuel that pushes you towards success. However, the idea of competing with others is fundamentally flawed. The reason why you shouldn’t compete with others is that you can’t race someone else when you both have different finish lines.
If your goal is to make $50,000 a year in real estate, you can’t compete with someone whose goal is to earn $150,000 a year. Competing with others for the sake of being the best is a losing battle. As a result, you will lower your self-worth, make yourself resentful of others, and have the never-ending feeling of constantly craving more out of your life.
You will never be happy in your real estate career if you compete with others.
You are the only constant in your life. Therefore, your own progress is the only way to measure your success. Instead of competing with other people, compete with yourself. Real estate agents should not be pressured to be better than others - they should push themselves to be better than they were yesterday.
Improving yourself is the only true way of being successful.
Competing with yourself gives you the opportunity to grow as a real estate agent and person. When you’re not worried about other people, you’re free from the stress to outperform others in your field. Moreover, you will appreciate your career and the development you’ve made as a professional.
Start competing with yourself today by monitoring your progress then consistently make an effort to outperform that growth. Doing so will eliminate the thousands of competitors in your industry because the only real competition is yourself.
Encumbrances are quite common in real estate transactions, and because they affect the legal right of a person to buy or sell properties, every real estate enthusiast needs to understand them.
Although encumbrances mainly come as monetary claims, some are more about property control than debts. These could be seen as land use covenants or government restrictions.
In this article, you would get to know what an encumbrance is, the various types of encumbrances, and how to discover and remove them to avoid complications down the road.
In real estate, an encumbrance refers to any claim on a property that prevents its owner from fully utilizing and benefiting from it.
This claim is usually placed by a third party who is not the owner of the property. Claims like these, when filed, can restrict and limit the ownership and/or use of the property.
An encumbrance on a home could be a result of anything, ranging from a loan agreement to a type of restricting license.
Depending on what type it is, legal processes may be necessary to address encumbrances. The existence of an encumbrance on a home has major consequences that could prove unpalatable for homeowners. Some of these effects are:
One effect of encumbrances is their limitation on ownership. This can result from a debt, legal contract, or a transfer of property ownership when given as a gift.
In cases where an encumbrance limits home ownership, the home is owned by the lessor or creditor, and the homeowner is subject to the limitations specified in the agreement or deed. These limitations prevent property sale or transfer of ownership by the homeowner.
If extremely restrictive, an encumbrance on a home may make the property's title unmarketable. This simply means that the property cannot be sold or bought.
As a result, it is extremely important for anyone looking to buy or sell a house to carry out findings into the property’s title to make sure it is not in any way encumbered.
There are various types of encumbrances in real estate. However, all of them have the same effect -create restrictions on a property.
Here are the four most common types of encumbrances that can be found on real estate properties:
An easement is a permission given to another party that grants them access to the home owner’s property for a specific purpose. It is created by an easement deed that is recorded in the public records of your county and becomes part of the title.
Easements sometimes ensure public services are available to all and are sometimes voluntarily granted to help another person.
For example, a landowner may allow a neighbor to construct an on-site well to avoid the cost of extending sewer lines to the property, or a driveway could be constructed through a person’s property to provide easy access to another location.
An encroachment occurs when a part of the property extends beyond its boundary and onto another property. This is often unintended and may not be detected until a survey is conducted.
Encroachments can be resolved simply by one landowner offering to sell part of the land which has been encroached on to the other landowner. If this offer is refused, legal actions can be taken.
An example of an encroachment is when barns, fences, backyards, and sheds stretch beyond their boundaries into someone else’s property.
Deed restrictions are contractual promises that bind a buyer to be subject to certain terms and conditions on a property.
These encumbrances may include a conditional purchase agreement when a buyer does not have enough money to purchase the property and needs financing, and very often, they determine the property's legal use.
An example would be a restriction that prohibits the construction of certain structures on a property.
Generally, if a deed restriction is too restrictive, many buyers may be unwilling to purchase the property.
Liens are one of the most common types of encumbrances in real estate.
If a property owner defaults on his mortgage payment, then a financial claim called a lien will be issued against the property.
This is to assist the creditor -banks or other mortgage agencies- to get back their money.
An example of a lien is when a court order that transfers ownership of the property to the creditor is issued.
Knowing if a property is encumbered is important to understand the restrictions and determine if they wouldn't interfere with your real estate plans.
The following are a few ways through which you can find out if a property is encumbered.
A title search is an investigation into the history of a property to ascertain and reveal any claims or restrictions and who the legal owner is. A title search reveals every detail about a property, including its transfer of ownership over the years, making it one of the best ways to discover if a property is encumbered. To carry out a proper and in-depth title search, it is best to hire the services of a title company.
Another way to learn more about the encumbrances on a property is to talk to a real estate professional.
A good and experienced real estate attorney will be able to detect and interpret any encumbrances on a property, as well as advise you on whether the property should be purchased or not.
Removing encumbrances is essential to the full utilization and benefits of your property. There are different ways to remove encumbrances, depending on the type.
In some cases, it could be as simple as destroying a structure from the property, while in other cases, it could be complicated enough to require legal action.
In the case of a lien, if the homeowner pays off the mortgage, a deed of reconveyance will be issued. This deed transfers ownership of the property from the lender to the borrower. Likewise, if it is an encroachment, reconstructing boundaries or purchasing the encroached land should remove the encumbrance.
Although encumbrances may appear to be terrible because of their restrictions, they serve to safeguard the property and can be advantageous to both owners and buyers.
Sellers who fail to disclose encumbrances to potential buyers expose themselves to severe legal action and buyers who fail to take note early may need additional funds to remedy encumbrances.
Encumbrances are one of the many ways the real estate industry regulates and monitors the sale and purchase of properties to ensure equity.
Understanding the different types of encumbrances will enable you to make informed decisions regarding buying or selling properties.
It will also provide you with an easy way out when you find yourself with an encumbered property on your hands.
Just like in every other industry, some real estate agents are super nice, some of them are incredibly helpful, and -- let’s be honest -- some of them are downright rude, mean, or incompetent.
The party you’re representing in the transaction is called your principal. Don’t ever forget that you are acting with their best interests in mind. Remember, there are multiple people involved in a real estate transaction, all of whom want the escrow to close.
There is the escrow officer, looking for his or her job to be complete. There may be a transaction coordinator looking to get all the documents signed cleanly. There are two interested agents looking for commission checks -- don’t let that process get held up! And of course, the sellers want to sell, and the buyers want to buy. You may not be able to control other people’s behaviors but you can control your reactions.
“You can't always control circumstances. However, you can always control your attitude, approach, and response. Your options are to complain or to look ahead and figure out how to make the situation better.”
― Tony Dungy, Quiet Strength: The Principles, Practices & Priorities of a Winning Life
There are two main ways real estate agents can make a situation more messy than it ought to be.
It’s important that you reach out frequently, and especially so if you’re not hearing back promptly. Your clients will appreciate you for it, and your commission check will come on time -- we call that a “win-win situation!"
When working with another agent, they are literally called your “cooperating broker." If they are not cooperating, though, there is a lot 1600risk. If the other agent is not being reasonable, it’s time for you two to have a one-on-one conversation, not in front of the principals and not at the house for sale.
You need to remind the other agent of a few things. First, you should always maintain a professional and friendly demeanor between each other. Second, you both have a lot riding on this sale, so it’s best to focus on the end result and put aside any differences you may have. Third, you MUST communicate openly and frequently about any issues that may occur. Neither of you want this escrow to fall through!
As they say, “it takes two to tango.”
Sometimes the other agent is simply unwilling or unavailable to be a good and thorough agent. As a last ditch effort, you can go to the broker of record on the transaction. This person, the head of the office at the brokerage, will be able to put some pressure on the agent to be a better representative for their principles.
They have a brand at stake, and they want to maintain the reputation of that brand with the clients and within the neighborhood.
So, as a recap, there are plenty of good agents out there. However, some of them are simply irresponsible -- whether uncommunicative, incompetent, or simply rude. You want to avoid them when possible. Stay professional, communicate constantly, and take them aside if necessary. If all else fails, go to their broker. Just don’t get discouraged!
An easement is one of the many types of encumbrances that can be found on real estate properties. Like all other encumbrances, easements limit the type of activities that can be carried out on a property by its owner.
Since they occur very regularly, it is important for any real estate scholar or investor to understand what easements are all about fully. This article explains in detail what easements are, how they work, and the different types of easements you can come across in the real estate industry.
An easement is a legal term that refers to the lawful right a person has to use a property they do not own for a specified purpose and time. It is a nonpossessory property interest that gives the easement holder legal rights to use another person’s property, usually with the property owner's knowledge.
Easements can be granted to government agencies or utility companies to ensure public services are accessible to all. Additionally, a neighbor or private party may decide to assist another neighbor or private party by granting them usage of their land for certain reasons. In some cases, the easement holder can pay compensation to the property owner for the use of the property.
Although most easements are recorded in public records and included in the property deed, the property owner possesses the title to the property and remains its rightful owner by law. Common easements may include road access, power lines, TV cables, and utility access.
Easements influence a property owner’s rights to use their property freely, and since the easement holder has legal rights to a property, the property owner is not allowed to infringe on those rights. For example, if people have to pass through a property to access their homes, it would be unlawful for the property owner to erect structures that obstruct the path in any way.
An easement is a mutual agreement between the property owner and the person requesting the easement; therefore, the property is utilized within guidelines that are explicitly outlined in the easement agreement. These agreements are sometimes transferred during a property sale, and the current owner has to keep up with them.
Under certain circumstances, an easement can be terminated by the property owner with the support of the law. This can either happen if the easement is abandoned or expired or if the reason for the easement no longer stands.
To completely understand how an easement works, here are several important terms that you need to be aware of:
The right of “ingress” is the legal right to enter a property, while the right of “egress” is the legal right to exit a property. These rights are granted to individuals through the issuance of an easement and can be exercised regardless of the type of property.
The rights to “ingress” and “egress” can come to be of unique importance in situations where a property owner risks trespassing onto the properties of others each time they enter or exit their property.
When an easement is issued based on providing access, the two parties involved are usually the owner of the “dominant tenement” and that of the “servant tenement.” The property which an easement falls on is the “servient tenement” while the property that benefits from the easement is referred to as the “dominant tenement.”
There are different kinds of easements, each depending on the conditions and specifics of the easement agreement. Below are detailed explanations of the most common types:
A prescriptive easement is an easement that is acquired through adverse possession. This type of easement is established when an individual openly uses a property for a continuous and uninterrupted number of years without the owner’s permission.
This easement is centered around the long-term use and enjoyment of a property. Therefore, a prescriptive easement can be legally granted on this basis even if the property owner disputes the use of the property by the other party.
A utility easement is an easement that gives utility workers the right to access infrastructure located on private property. Utility easements come with restrictions and can be very inconvenient for the property owner. Without these easements, utility companies may find it challenging to provide services for everyday lifestyles, such as pipelines and sewers.
When a utility easement is initially granted, the existing owner will often be paid some compensation. However, subsequent property owners are usually not entitled to receive compensation of any form.
“Appurtenant” is a legal term that means something that belongs to a larger body. Therefore, an easement appurtenant is a type of easement that is permanently attached to a property and not just present for the short term. Since it is permanent, it is usually transferred to a new owner along with the property title.
An easement in gross is an easement that is attached to a person or an entity and not to the property itself. This easement is considered valid throughout the life of the burdened property owner but may become void if the property is sold.
An easement in gross is often granted to utility companies, permitting them to construct public infrastructure on private property. Other examples can be when a property owner allows a person to use their property for hunting.
Easements are most of the time granted to provide improvement and solutions to situations. However, while they do this, they also limit the owner’s use of the property, which is why some people might consider them bad or uncomfortable.
Whether easements are bad depends on the property owner's or buyer's preferences. Many property owners wouldn't want to have limited use of their property, while others wouldn't mind as long as it is justifiable. Therefore, general feelings towards easements are mixed.
The best thing to do as a prospective property owner is to find out if there are any easements on a property before buying it. If there is one, you might want to consult with a professional to fully understand the agreements and conditions of the easement, after which you can decide if you want to purchase the property or not.
An in-depth understanding of the concept of easements is important in knowing your rights, responsibilities, and the limitations you stand to face with them.
You should know that asides from limiting your rights as a property owner, easements can also significantly impact the value of a property. Therefore, it is important to seek professional help before making any agreements or purchases.
Starting your journey as a real estate agent can be scary.
From adopting the right frame of mind to understanding your finances, there are many challenges that new agents face. In this survival guide, we'll share practical advice to help you navigate your first year successfully.
The first year in real estate is full of challenges, and the right mindset can make all the difference. It's common to feel overwhelmed when progress seems slow, but instead of getting discouraged, you need to get M.A.D.
Managing finances is crucial for new real estate agents. It's important to understand where to invest and how to plan for expenses.
Setting realistic goals is vital to tracking your progress and maintaining momentum. Both short-term and long-term goals are essential for guiding your career.
Goal setting keeps you focused on growth and helps you avoid wasting time. With clear objectives, you can work towards specific achievements, ensuring that you're on the right path.
Setting goals that are too ambitious can lead to discouragement if you fall short. Instead, break down your larger goals into smaller, achievable milestones. For example, instead of aiming to make $100,000 in your first year, set a goal of earning $25,000 per quarter.
This makes it easier to stay motivated as you achieve smaller successes.
As a new real estate agent, it's important to stay organized and focus on the essentials that will help you succeed. Here is a checklist to guide you through your first year:
The only way to earn clients is through consistent prospecting. Networking and building relationships are fundamental to building your career as a real estate agent.
To generate leads, you'll need to actively meet people and get referrals. This process, known as prospecting, is the foundation of any successful real estate business.
Your sphere of influence includes your immediate network of friends, family, and acquaintances. These people already trust you, making them a valuable source of potential leads and referrals. For instance, if someone in your network is planning to sell their home, you can leverage your relationship to gain their business.
Advertising and marketing are also effective for expanding your network beyond your immediate sphere. Paid ads, digital marketing, and in-person promotions can help you generate fresh leads and build your reputation.
Your first year as a real estate agent will be full of ups and downs. Challenges, setbacks, and successes are all part of the journey. The key to success is staying disciplined and refusing to give up.
Patience and perseverance are essential traits for surviving and thriving in your first year. Many new agents enter the industry expecting instant success, but the reality is that building a successful career takes time and consistent effort. Stay patient, stay committed, and remember that hard work always pays off.
Encroachments are one of the biggest encumbrances in real estate that affect homeowners. Just like other restrictions that may be on real property, encroachments affect an owner’s ability to make use of their property in whatever way they feel is best.
As a broadly used term and regular occurrence in real estate, it is important for real estate enthusiasts and homeowners to fully understand what encroachments are about.
With this article, we aim to provide you with adequate knowledge of what encroachments are, how they work, and how to deal with encroachers.
Encroachments are situations in real estate when part of the property extends beyond its borders and onto another property.
It can also be referred to as the violation of contractual property rights by illegally building or extending structures onto neighboring properties without approval.
Encroachments are a significant cause of conflict between neighbors and are perceived to hinder the buying or selling of a property.
Whether it occurs with or without the knowledge of the encroacher, the encroaching property owner remains responsible for infringing on the rights of their neighbor.
Let's say a homeowner decides to erect a fence around his property, and in the process, the structure extends onto another property.
This will mean that the homeowner is guilty of encroachment and has infringed on the property rights of his neighbor. Encroachments often occur when homeowners make improvements on their property without requesting building permits and conducting surveys.
Most times, it is possible that an encroachment may not be noticed until a proper survey of the property is conducted.
Therefore, it is important to get a professional to examine the legal descriptions when buying a property. Homeowners can also call for surveys to settle disputes between neighbors.
An encroachment may be as simple as tree branches growing beyond a property’s boundary or as severe as a structure intruding into another property.
However, it is usually left to the owner of the encroached property to decide on what actions to take. A property owner may decide to overlook the encroachment if it doesn't cause any inconvenience.
If you discover that your property is being infringed upon, your next line of action should be to contact the encroacher and take steps toward resolving the problem. Here are the best practices to use when dealing with encroachers.
In many cases, a friendly conversation could be all that is needed to resolve an encroachment.
This is usually effective when the encroaching structure can easily be removed, and the encroacher has no problem doing so.
Encroachments such as intruding tree branches or an overlapping garden can be handled this way.
Some encroaching structures may be too difficult to take down or may have cost a lot of money to erect.
Therefore, offering to sell the land that is being encroached upon to the encroacher isn't a bad option. The encroacher doesn't have to bother about demolitions, and as the property owner, you get paid for the portion of your property.
Since your property serves as collateral for any existing mortgage you might have, it is necessary to consult your mortgage lender when doing this.
You might also want to hire a real estate attorney to ensure that accurate land survey records are kept.
Legal actions should only be taken as a last resort when dealing with encroachers. If you and the person responsible for the encroachment are unable to come to a peaceful and fair agreement, you might as well just take the matter to court with the help of a real estate attorney.
Encroachments and easements are two similar real estate terms in the sense that they both involve the extension of structures onto a neighbor's property.
Despite this huge similarity, they are inarguably different. When there is an encroachment, the structures exist on the property illegally and without permission.
There is often compensation paid to the neighbor by the property owner requesting the easement for the intrusion.
Unlike an easement, encroachment problems that go on for years can give ownership rights to an encroacher through adverse possession.
Also known as “squatter’s rights”, this is the occupation of another person's property to own it.
Nonpossessory interests and possessory interests are rights, claims, or privileges that an individual has regarding land or real property.
Although these two real estate concepts share some similarities, they are as different as the two sides of a coin.
A nonpossessory interest is the right possessed by an individual to use another person's real property or land. It is usually an agreement between two parties expressing one person’s intention to use the other’s property.
This agreement can be made through a contract, as in a lease agreement, or through a verbal agreement. An example of a nonpossessory interest is an easement.
On the other hand, a possessory interest refers to an individual's right to occupy real property.
Although a person with a possessory interest does not own the property, they have some right to control it. This interest is expressed in a contract agreement between the two parties.
Now that you have fully understood the concept of encroachments, you can see that they shouldn't be taken with levity.
It is possible that even the slightest infringement on real property can cause many problems to the property owner. These problems include an inability to sell and, in severe cases, the loss of a part of the property to an encroacher.
Therefore, when encroachment is noticed, the property owner should begin dealing with the encroacher immediately.
Also, seeking the expertise of a real estate attorney is always a good idea when dealing with cases like this.
A deed restriction is a term widely used in real estate to refer to any limitation on a property that affects the ability of the property owner to utilize the property as he wishes.
As a real estate enthusiast or a potential investor, it is crucial to understand what deed restrictions are and what sort of challenges they pose to property owners before deciding to go on with any real estate transaction.
In this article, we shall cover everything you need to know about deed restrictions: what they are, how they work, and how to check for them. So, what are deed restrictions?
Deed restrictions are provisions in a deed that limit how property owners can use their property. These restrictions are rules and regulations that govern the legal use of a property and are usually stated in the property purchase agreement.
The buyer is expected to be aware of these restrictions before agreeing to them, and once the deal is signed, these terms are legally binding on the buyer.
Deed restrictions are one of the most common types of encumbrance on a property. They usually dictate what can be built on a piece of land or what a property can and can't be used for. They can either apply to one specific property or a subdivision of properties, regardless of who owns them at any point in time.
For example, in a neighborhood of look-alike houses, specific regulations may be set to ensure that every building maintains a particular look, thus limiting homeowners within the area to make any changes to the look of their property.
Deed restrictions work in the following ways:
The duration of a deed restriction on a property varies, depending on the source of the restriction. While some stay for only a limited amount of time, others can remain for an unlimited period. These are the two most common sources of deed restrictions on real estate properties:
Covenants, conditions, and restrictions, also known as CC&Rs, are rules and regulations of a neighborhood -usually a planned community- that govern all activities regarding the homes in the area.
For example, CC&Rs may state that all cars should be parked inside the garages at all times or that all fences should be painted a particular color. It isn't unusual for CC&Rs to regulate things like the general home appearance, short-term rentals, pets, satellite dishes, parties, business, and trash cans.
Covenants, conditions, and restrictions are considered a type of deed restriction because once these rules are agreed to, they create limitations that impact the day-to-day lives of homeowners and their freedom to use their property as they will.
The declarations of a neighborhood’s CC&Rs are usually documented in the records of the county within which the neighborhood is located and are legally binding.
A Homeowners Association is a legal non-profit association in charge of maintaining and managing assets in a community.
Once a property is purchased in a planned community, the buyer automatically becomes a member of the Homeowners Association and has to abide by the HOA’s governing rules.
HOAs are the primary enforcers of Covenants, Conditions, and Restrictions. They impose penalties such as fines, lawsuits, and suspension of community privileges for any violations of the Association's governing rules.
A freehold estate refers to a real property whose owner possesses exclusive rights to the property for an undefined period. Simply put, a freehold estate gives its owner full privilege and absolute reign over the land.
Unlike houses with deed restrictions where limitations restrict a homeowner’s preferences, freehold estate owners are at liberty to decide what to do with their property and what not to. The homeowner can customize the property to their taste without having to answer to anybody.
In a freehold estate, the owner has a right of title to the land and the property attached to the land. There is no fixed duration for ownership, and ownership can be passed from one person to another without end.
Unless you've always wanted to live in a planned community, purchasing a deed-restricted house could be a problem if you're unaware of the restrictions attached to the property. This is why it is essential to check if a home has deed restrictions before purchasing it.
Here are two ways through which you can do this:
A title search report is a document that contains accurate historical and legal descriptions of the transfer of ownership of a property over time. Title search reports also identify limitations or problems that could affect the purchase of the property.
By conducting a title search on a property through public records, it will be easy to find out if there are any deed restrictions on the property, thus preventing any unpleasant surprises much later.
Since CC&Rs are also documented in county land records, visiting the county clerk's office can be a great idea when checking for deed restrictions. The county clerk's office will provide you with a deed abstract that lists the encumbrances, rules, and regulations attached to any given property.
There is no doubt that deed restrictions are limitations, but whether they are bad depends on the homeowner's or buyer's preferences. Some individuals enjoy the organized and uniform scenery of planned communities, while others crave the freedom to express their individuality.
Although deed restrictions may be regarded as too exacting, they are effective measures to curb the excesses of homeowners, thus ensuring that the interests of everyone are protected. If you are not a fan of deed restrictions, then the safest thing to do is to search a property’s history before purchasing it.
Deed restrictions are encumbrances that exist as part of real estate contracts known as a deed. These documents outline how a property owner is expected to use a property. By signing this contract, the buyer agrees to abide by the rules guiding the use of the property.
Remember, before making a real estate purchase, it is important to know if any restrictions are attached to the property and how serious or restricting they are.
Nobody can predict the future of real estate. With the popularity of new websites like Trulia and Redfin, you don't need a crystal ball to see the impact they’ll have on the industry. Technology and websites are making real estate research, purchasing, and selling easy and accessible to everyone.
California real estate education is important to being a successful agent. But, some people are getting discouraged from entering a career path that could become obsolete.
This leaves people questioning the relevance real estate agents have in the next few decades. More people than ever are using websites to answer questions and to sell or buy property.
Despite some people’s expectation of an inevitable real estate agent demise, the future might not be as bleak as they think.
Third party aggregators like Trulia, Zillow, and Redfin have made their presence known in the real estate industry. However, they can’t replace the work of a Real Estate Agent. When selling a property, there’s information the regular buyers and sellers don’t know.
This is the data accessible to the Real Estate Agent; information the websites don’t distribute.
Real Estate Agents help clients through the entirety of the property transaction process. From the legal issues involved (such as disclosure reports) to filing the correct paperwork, buying or selling a home turns into an overwhelming process.
Real Estate Agents lessen the burden of the legal hoops clients have to jump through.
Real Estate Agents share a common feeling that websites are stealing clients. When a property is listed on a website like Trulia, Zillow, or Redfin, the client will bypass the agent to go straight to the property owner or buyer.
What most agents don’t realize is this isn’t a case of losing clients, but an opportunity to make the transaction process efficient.
Instead of spending days - even weeks - browsing through property listings, clients have the opportunity to come prepared into a meeting with a Real Estate Agent.
Less time is spent on client-agent property searching, and more time on the transaction. When you have prepared, decisive clients there becomes more room to take on additional clients.
You will have more clients, commission, and time to run an efficient business.
The presence traditional Real Estate has in a digital world doesn’t change. Despite owning a website, you still have to go door-to-door finding leads. Currently, the digital world doesn’t have the services available to remove traditional Real Estate Agents from the transaction process.
Real Estate Agents have to shift their mindset when working with clients. Instead of looking at websites as a lead thief, they should use them as a tool to expand their clientele. Moreover, the transactions in Real Estate are extremely complex.
This kind of intricate transaction can’t be done behind a computer.
Real Estate deals need to be done between people due to the extensive amount of paperwork, negotiation, and relationship building involved. A good Real Estate Agent will have skills in bringing people together and being the mediator between two parties.
Their goal, in the digital world, is to ensure buyers and sellers are both happy.
Online discount brokerages, such as Purplebrick and Redfin, are websites that list houses for a substantially less amount of money than you can with a traditional Real Estate Agent. This type of business discounts people’s ability to make money. Essentially, it’s a discounted service.
This might sound like a great deal, however the quality of service reflects its costs.
When selling or buying a property, the current tech and website climate will only get a client so far. If a client is serious about buying or selling, they need to hire a real estate agent.
Whether you’re a real estate agent or a first-time homebuyer about to go through the process, following the proper ethics around kickbacks will help you navigate the transaction easily.
Kickbacks are illegal payments or gifts that occur during the transaction. These laws were put in place to avoid any bribery and protect consumers in the process.
While not all gifts or rebates fall under the illegal kickback category, it’s essential to understand the complexity and how the law defines kickbacks.
A kickback in real estate is when a real estate agent, who has a fiduciary responsibility to the client, receives benefits or items of value for referring certain businesses or services.
These are usually illegal and considered bribes, as it is often in the form of cash or something of value like a gift.
If your agent recommends additional real estate services like escrow companies, title companies, inspection companies, or other businesses that are involved in the real estate transaction, they have to comply with the law and not be bribed to refer business.
This helps maintain the integrity of the transaction and ensures consumer’s interests are protected.
A piece of law called the Real Estate Settlement Procedures Act (RESPA) was put in place in 1974 to prevent unethical or illegal actions between real estate service providers and their clients.
Real estate agents and mortgage brokers must abide by this, and it falls under the jurisdiction of the Consumer Financial Protection Bureau. Under RESPA section 8a, giving gifts or kickbacks in exchange for business is illegal.
Specifically, it prohibits any “unearned” fees or bonuses paid for services that weren’t performed.
RESPA is civil law that applies to all federally regulated mortgage loans, including purchase loans, refinances, home improvement loans, land contracts, and home equity lines of credit.
RESPA will not cover transactions like all-cash offers or rental transactions where a mortgage is not involved.
If you are caught violating RESPA as a real estate agent or mortgage lender, you can face severe consequences such as:
These kickbacks, in certain situations, can also be considered tax evasion since they are unreported income for the agent.
If you have any concerns about when or who can give gifts during the transaction, it’s best to confirm with your broker or a real estate attorney to ensure you’re not violating any RESPA laws.
One key exception to RESPA is when a referral fee is paid between two licensed real estate professionals.
This can be done when one real estate agent refers business to another agent and end up doing a transaction with that client. Sometimes known as a “finders” fee, it is not uncommon for a real estate agent to pay a small percentage of their commission for referring a client to another agent.
This can be anywhere from a few hundred dollars to 25% of their commission, depending on the state they’re in and the agreed-upon fee between the parties.
Each state has different regulations that outline what constitutes a referral fee and how much an agent is able to give, so check with your local state’s board of realtors to confirm. Most states require you to be a licensed real estate agent to receive a referral fee.
But a few states will allow unlicensed individuals - like previous clients - to receive a finders fee for sending business to an agent.
However, this does not apply between mortgage brokers and real estate agents. It is considered an illegal kickback when a referral fee is paid between a real estate agent and another service provider. But if it’s a referral fee between two real estate agents, it is permissible.
While providing gifts in exchange for referrals violates RESPA, not all credits or gifts to clients are against the rules.
A mortgage lender or agent can offer the buyer or seller a closing credit or gift for using them as their service provider — just as long as there are no expectations to refer other businesses to the lender.
RESPA allows for gifts, refunds, or discounts to the client if it doesn’t involve referring business to that provider.
In this case, an agent might offer to refund part of their commission in the form of a “closing credit” that can go towards the client’s down payment and closing costs.
These credits are legal in 40 states and allow agents to give their clients a little money back at the closing table if necessary.
Giving gifts to a client at the closing table or after they move into their new house is a common practice in real estate.
But does that count as a kickback? According to RESPA, as long as there are no strings attached to the gift, agents can give gifts to their clients.
These would be considered more of a thank-you gift and is a way to build a relationship with clients.
These types of gifts and rebates are okay, so long as the client is not expected to get a referral out of it. Remember that next time you want to thank a client for choosing you as an agent!
While Kickbacks are illegal and unethical in real estate, there are some exceptions to gift-giving for your clients, and from agent to agent.
RESPA was created to ensure that buyers and sellers have full transparency and trust in the transaction. If you’re a real estate agent, make sure you’re following proper procedures to avoid violating RESPA laws.
Make sure you have a complete understanding of the law so you can avoid any RESPA-related issues!
While technology has changed a lot in the real estate industry, open houses are one of the most popular “traditional” tactics that real estate agents use to sell homes.
But does hosting an open house and having strangers walk through actually help sell the house? Well, that depends.
An open house is a publicly marketed event hosted by a real estate agent that allows prospective buyers and their agents to tour the home during set hours.
Agents will often host these on the weekends, and they’ll last anywhere from 1 to 3 hours. During that time, the agent will show people around the house, answer any questions and hopefully, find a buyer for the house.
When you get ready to list a property, the agent and the seller will discuss ways to market the property to get the most exposure.
Once the seller agrees to allow the agent to host an open house, the agent can begin marketing it to their network and sharing publicly.
They can also include it in the MLS description of the property, so other agents are notified that an open house will be held. If the open house is entered officially on the MLS, it will also show up as an upcoming event on sites like Zillow, Redfin, and Realtor.com.
On the day of the open house, it’s strongly recommended that the seller of the property is not present. This will prevent any awkward scenarios where the potential buyer meets the current owner.
Once the owner has left the property, the agent will stay at the house and greet any visitors or agents that attend.
Usually, you can expect a wide variety of people attending, ranging from neighbors, real estate agents, home buyers that are starting to look, or sellers in the area who want to look at comparable homes.
As a buyer, when you visit an open house, you’ll be asked to likely sign in and share some information with the listing agent. This can help the agent determine if you’re already working with an agent or might be looking to hire an agent to help in your home search. As a newly licensed agent, hosting open houses can be a great way to generate buyer leads.
There are a lot of benefits to having an open house, and when done correctly, they can generate a lot of interest in the property.
It’s hard to exactly attribute the percentage of homes that sell from an open house, but it can be an effective tool to gauge interest and get more eyes on the property.
While most sellers start their home search online, they will need to see the home in person to make a final decision.
Having an open house to welcome prospective buyers is often a much more relaxed and less formal way to view a house instead of scheduling a formal showing.
It also is more convenient, allowing buyers to visit several open houses throughout the course of the weekend.
While touring, they can ask questions, visualize themselves in the space and get an idea of whether the house is a good fit for them.
According to a 2018 Zillow study, 72 percent of sellers in urban areas host open houses, 63 percent in suburban areas, and 42 percent in rural areas.
Depending on your seller’s situation or the home's condition, it might not always be in their best interest to have an open house.
Make sure you weigh the pros and cons with your seller to ensure everyone is on the same page.
If you want to get additional traffic to your property without opening the door to the public, hosting a broker’s open might be a better fit.
At a broker’s open, only other licensed agents or brokers can attend, providing a more intimate and exclusive setting for agents to preview the property.
From there, they can consider whether they have a client who might be interested in viewing it.
Depending on the property, your seller’s wishes, and your local market, a broker open could be a better fit for you.
While they’re not necessarily any better than an open house, they accomplish the goal of getting additional traffic to the house from professional real estate experts.
This can give you, the seller’s agent, great feedback about the home and the opportunity to network with other agents.
A broker open is a great way to provide your client feedback from other industry professionals.
If, ultimately, your seller isn’t comfortable having strangers come through their house en masse, you will have to conduct private showings with potential buyers.
This is when prospective buyers and their agent will schedule a time to view the home without other buyers or the current owner present.
Most serious buyers will plan a private showing where they can have the house to themselves and ask the seller's agent specific questions.
At the end of the day, hosting an open house is an individualized decision you and your client should discuss. While there are plenty of benefits, there are certain situations where it might not make sense:
Ultimately, it’s up to the seller whether they feel comfortable with an open house. Make sure you walk your clients through all the pros and cons so they can make an informed decision that works best for them.
Your clients might have an urge to find houses for sale by owner to avoid working with real estate agents now. To be the best Realtor® California has ever seen, you must follow a strict code of ethics. This means, when there’s property for sale, the client is the agent’s priority.
Your client shouldn’t learn how to buy a house on their own because they worked with a dishonest real estate agent.
Sticking to the ethical code that was created by the National Association of Realtors® is important to maintaining an agent’s moral integrity. Without it, the industry will get filled with low value agents trying to make a quick buck.
The National Association of Realtors® changed the industry in 1913 when they developed a code of ethics. By doing so, they solidified the ethical duties and responsibility that agents uphold in their profession.
The goal of the code of ethics is to create cooperation among real estate agents to further meet the client’s best interest.
The NAR® code of ethics is used as a moral compass for agents. Even going as far as to say that agents “...connote competency, fairness, and high integrity resulting from adherence to a lofty ideal of moral conduct in business relations. No inducement of profit and no instruction from clients ever can justify departure from this ideal.” Agents must put aside the idea of earning a few extra dollars to stay true to their moral integrity.
Those who are loyal to the real estate agent’s mission will respect the client’s best interest and work for them. Unfortunately, a few agents will stretch the truth with the client.
The reason why agents mislead a seller or buyer is because they’re desperate to earn their commission. Most of the time, the agent will try hyping up their client when finding homes for sale in California. They do this by promising fantastic - but unattainable - deals on their home.
This is to excite the client so they will hire the agent.
The agent will be desperate for clients depending on their current level of success and the size of their clientele network.
If the agent is unsuccessful in their career, they’ll have more desire to manipulate the truth. The same goes for an agent with a small network. When they hype up their client, they’re trying to grow the amount of connections they have.
You can avoid this low status agent behavior by committing to the NAR® code of ethics.
Deciphering the difference between truth and “untruth” can be complicated for the client. Telling the truth is always the best policy.
This allows clear, unaltered, real information to be exchanged between the client and agent.
When an agent chooses to lie or give false information, they’re being untruthful. For example, an agent might tell a client to raise the price of their home to create a sense of excitement towards the agent.
The client will be more inclined to work with someone who could make them more money.
Agents know this and will leverage this desire in their favor. When agents sugarcoat information as a way to be more marketable, they are being deceptive.
As an agent, you should always be supporting and honest to your client.
Always play fair in real estate. Being dishonest and corrupt in your business is a great way to lose your license, but it’s also a morally irresponsible characteristic for a person.
The California Association of Realtors® (CAR) handles investigation into any ethics violations. This means brokerages are investigated when an agent has committed an action deemed immoral or unethical.
Agents sign with the brokerage, so the actions of the real estate agent reflect that of the brokerage.
When unethical behavior is reported, CAR undergoes an extensive process investigating the report. Depending on the severity of the report, CAR could warrant the suspension or revocation of the perpetrating agent’s license.
When you put your client first, everyone will notice.
Practicing clear, transparent communication is an effective way to show the client you respect their time and business. When you are open, honest, and communicate your goals, they will reward you with their loyalty.
You should also keep your word. Holding yourself accountable to provide quality service is important to building trust between you and your client. If you promise to sell their home after raising by $50,000, you should do everything in your power to do so.
Agents can build strong relationships when they are honest with their clients. When they do, there’s immeasurable returns.
When you practice honest habits as a real estate agent, you’ll earn a larger network of clients.
This happens because people want to work with you. When a client finds a real estate agent they trust, they’ll most likely hire them for future deals or recommend them to a friend and family. A successful real estate agent grows their network quickly through referrals.
Avoid falling into the vicious circle of dishonesty by holding yourself accountable to being an honest agent. Doing so will decrease the incentive to lie or tell “untruths” to future clients. As a result, your network will grow - so will your commissions!
If you're selling a house, what kind of brokerage should you work with? Ideally, convenience is best. You may turn to online brokerages.
Online brokerages like Redfin provide convenience and lower fees. But are the services better?
This article walks you through the advantages and disadvantages of using an online real estate brokerage.
Sure - listing houses for sale with an online brokerage can help you save money. Instead of breaking off 6% of the sale with a traditional realtor, you could be spending around 1% with an online brokerage.
This small percentage change means monumental savings.
But, like any discount brokerage, you get what you pay for. Using an online brokerage could mean you lose the opportunity to work with a real estate agent.
In fact, online brokerages like Redfin and Purple Bricks are directly competing with the brokerages you see today. The reason being: saving money is great!
But, when you spend less, you may want to expect less. Real estate agents prefer higher commissions.
When a commission of 1% is split between the broker and real estate agent, the agent will be less likely to work with you.
Sellers can undoubtedly save money using an online brokerage.
Compared to a brick and mortar brokerage, the amount of money that one can save is highly apparent. Companies like Redfin or Purple Bricks will charge the seller around 1% when selling their house.
If the value of the house is $1,000,000, then that’s only $10,000 spent for listing.
A traditional real estate agent will charge the seller 6% for selling the house. Taking the same property value, that’s $60,000.
With $50,000 at stake, making the decision of who will sell your house becomes pretty simple.
Online brokerages make selling and listing the home easy for the seller. They also make the service charge affordable.
This sounds too good to be true, right? Well, there’s one, large downfall that makes this great deal, not so great.
When you’re working with an online brokerage, you get what you pay for.
Paying a lower amount of money to sell and list your property will bring less buyers and a lower quality of buyer.
You don’t have the opportunity to filter the right person for your home. Additionally, buyer agents will not take interest in your property, because they’ll have to share the 1% commission.
The buyer’s agent will be deterred, because they don’t want to invest their time to split $10,000 with an online brokerage. They could be earning more money for themselves and client by working with traditional real estate agents.
As a result, online brokerages could make the selling process more challenging.
When a traditional real estate agent charges the seller 6%, they’re committing to a promise of quality service. The agent will make the process of selling a home simple by finding valuable buyers for their client.
By paying the extra 5%, you are agreeing to hold the agent to a standard that will pay dividends when finding your buyer.
This means they will be working for the seller.
By looking out for your best interest, they will go above and beyond what an online brokerage is able to do. By meeting your needs and finding the right buyer for your home, your sellers agent will show you why the 6% service charge is necessary.
You can save money with an online brokerage, but it might cost you much more money down the line.
Homebuyers stress over finding the absolute perfect home. When they purchase a property, they want to know everything there is to know about it.
But, when the seller withholds a real estate disclosure, the buyer could find these imperfections after the purchase.
Without a property disclosure form, the seller could be held responsible for fixing these issues that creep up after the transaction - especially when they had already known about them. A seller’s disclosure agreement helps make all issues with a house apparent to the seller.
By signing a sales disclosure form all parties are legally aware of the property problems before closing the purchase.
Yes - buyers always have the right to know about issues with a piece of real estate. This is because the homebuyer may not want to purchase the home if they had known about the property’s defects.
With this in mind, it would be unethical to knowingly withhold information from them.
A house disclosure informs the buyer of every defect. Some agents might think this is a bad thing, as it will deter buyers from making a purchase.
To some extent, this is true.
But, buyers will be more eager to work with an agent, if they’re upfront and transparent with the house issues.
The best way for the buyer and seller to communicate the problems with the property is through a real estate disclosure form.
Also known as the seller’s disclosure form, this legal statement reports the condition, well-being, and material defects of the home.
The seller’s property disclosure statement is usually found in the transaction document. This will have a complete description of the defects of the property and ensure the buyer is aware of these problems before completing the transaction.
When the buyer reads the disclosure statement, they will be informed about the property issues.
When the seller or agent intentionally withhold information on the property problems, there will be a chance of legal repercussions.
There will be legal backlash for the real estate agent - and especially the seller - if problems are knowingly withheld from the buyer.
In some situations, buyers are even suing sellers for nondisclosure of latent defects.
Latent defects are problems that are not obvious during the house inspection. One example of a latent defect in the house having a coat of led paint.
This isn’t something that would be obvious during the initial inspection. Therefore, the buyer will have to be told about this information.
However, the seller and agents are not responsible for sharing patent defects. These are the issues that are apparent upon a normal inspection of the property.
This could be apparent house blemishes, such as damaged material property.
So, who’s responsible for fixing the issues with the property? Moments like these are why real estate agents are important.
Disclosures can be used as negotiation power during the transaction. That’s why most sellers are afraid to share them.
A real estate agent will leave a major impact on their client if they’re able to negotiate in their favor.
If you’re representing the buyer in a transaction, and you’re able to convince the buyer needs to fix the issues with the property, you’ll be doing the buyer a major favor.
Putting the needs of the clients first is one of the characteristics of a successful real estate agent.
There are thousands of experienced real estate agents who will happily share their best method of selling real estate.
Filtering through the noise of empty real estate tips can be a challenge. However, there’s one piece of advice that will always outperform other real estate agent tips.
You’ll find the best selling tips by discovering what makes a good real estate agent a great one. Instead of researching overnight hacks, there’s one strategy that will change your real estate career for good.
The right way to sell a property is with grit, tenacity, and - most of all - passion.
Passion is real estate isn’t just a motivational hack. It’s a measurable characteristic that clients and peers will notice. People who are passionate will always be more likely to succeed in their careers. Here’s how you can stay passionate to sell a property.
Becoming a real estate agent takes discipline and stamina. Holding yourself accountable is a challenge that most agents struggle with. As a result, they find themselves in 3 different levels of effort.
Most agents will fall into the level of doing the bare minimum in their careers.
These are the people who will learn the course material, pass the real estate state exam, and sign with a brokerage, but fall short of excelling in their careers. They follow the same motions day-in and day-out.
The next level is for the agents who perform above everyone’s average. You will find these people closing more deals, developing a brand, and being well versed in real estate knowledge.
Finally, the best real estate agents are the ones who perform well in their jobs and show passion. These are the agents who have a superb reputation.
They work hard in their careers and they stay invested with their clients. These agents will go the extra distance that most choose not to.
People always want overnight success. They believe finding that one tip or trick to better their real estate careers will fall into their lap. Then, they expect to have instant success by following a strategy guide or scheme.
In real estate, there are no overnight success tricks.
The best real estate selling tips to make you successful are: working hard and showing passion. People want to work with those who are invested in their careers. When you are dedicated to doing the best job you can, you will attract clients and professionals to you.
Passion is the strong, emotional drive that makes you invested. When passion is described like this, it might sound unattainable if you don’t have it. Passion is something that comes to you when you’re able to shift your mindset.
When you figure out what makes you care - you will find it easier to feel passionate about your career. In regards to real estate sales, you will feel passionate about finding the best deal for your client, when you've invested in ensuring they have the best property at the best price.
This is why building strong relationship with clients and peers is a vital part of being a real estate agent.
Discovering why you care about your job will always lead to being invested in your career. When you are invested in your career, you will become passionate. Therefore, the right way to sell or buy property is to, firstly, care.
The first step to combat discrimination in the United States was the Civil Rights Act of 1866. However, neighborhood discrimination wasn’t addressed until the Civil Rights Act of 1968.
Also known as the Fair Housing Act, this legislature made “refusal to sell or rent a dwelling to any person because of his race, color, religion, or national origin” illegal.
Real estate agents can’t determine where the home buyer can or cannot live. That’s why choosing your client’s future home should be handled with caution.
In 1968, The Fair Housing Act was passed to counteract discriminatory behavior that controlled the ethnic makeup of neighborhoods.
This legislature was to provide equal housing opportunities to everyone, no matter their race, religion, or national origin.
This landmark regulation wanted to take the discrimination out of the housing.
This was an expansion of the Civil Rights Act of 1866, which didn’t enforce federal action against discriminatory behavior in housing.
The major acts in housing discrimination were steering and redlining. Each attempted to serve the real estate agent to make a sale or fragment neighborhoods based on ethnicity.
Steering is the act of guiding home buyers to neighborhoods based on their race, ethnicity, or religion. It also worked in guiding home buyers away from neighborhoods.
This practice was used by real estate salesperson agents and urban planners.
Racial steering is used to segregate neighborhoods.
Steering as an act is something that hasn't gone away since the early 1900s. One of the most recent national cases occurred in 2006.
When dealing with a client, you should always consider where they want to live. Never outright choose the location for them without hearing their interests, tastes, and needs.
Therefore, the best way to avoid racial steering (even inadvertently) is by asking the client “where do you want to live?”
Redlining is another discriminatory behavior in real estate. This is the act of segregating neighborhoods based on race, ethnicity, and religion.
Redlining was used most often with banks in the mid to late 1900s to avoid financial investment in minority-populated neighborhoods.
This form of discrimination accounts for the devaluing of land and property by encouraging a negative stigma.
For example, in the late 1900s, banks wouldn’t give loans to residents of redlined zones, causing the well-being of houses and property to drastically diminish.
This resulted in the well-being of land decreasing as well.
Real estate agents must show the property in a variety of neighborhoods. In other words, steering a client to a redlined neighborhood is illegal and must be avoided.
When a client asks about the racial makeup, crime rate, or education rate of a neighborhood, always direct them to resources that will help answer these questions.
Advertising property must be handled with care. Promoting a property could result in excluding certain populations from the property. This won’t only be considered illegal practice, but it could harm your business whether intentional or not.
You must be conscious of advertisement phrasing.
Aside from being aware of race, ethnicity, and religious practice, you should consider how you speak to people of a specific gender, disability, and familial status.
Here’s one example of unaware exclusionary phrasing: When advertising a property with a great hiking trail, you might say, “This home is fantastic for hikers.”
What you might not realize is this is excluding people who cannot hike, because of a disability.
They will be less likely to work with you, because of being excluded from your advertisement.
When you’re in doubt about whether or not something could be exclusive, you should omit it from the advertisement. Also, always be aware of how your speaking to others, whether through a listing or in person.
Inclusivity goes a long way - especially in real estate.
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