Two exciting milestones this week...

1. I turned 30 yesterday.
2. After 294 posts, and 292 comments, on Saturday, this blog will be a year old. 

Thanks to all who read, provide feedback and ask questions!

You may have noticed a new masthead on my blog --- HarrisonburgHousingToday.com.  For those who might wonder, I made this change to more accurately represent the information presented on my blog.

It's the end of an era, I suppose, as for the first nine months of this blog, it was known as...
 "Coffee With Scott :: Scott P. Rogers' Caffeinated Real Estate Blog"



I decided that my blog's old identity suggested that this source of local real estate information was all about Scott.  In reality, it's about keeping you informed with the latest market updates, analysis and commentary about real estate in Harrisonburg and Rockingham County.

One final coffee-related note --- as previously mentioned on my blog --- if you're interested in discussing any of the topics on this blog, or the details of your specific real estate situation, I am more than willing to treat you to a cup of coffee (or tea) at your favorite coffeeshop.  Call, e-mail, or text me, and we'll set a day and time....

Call > 540.578.0102
E-mail > scott@cbfunkhouser.com
Text > 540.578.0102

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Josh posed the question of whether Realtors make extraordinary profits on home sales, and suggested I shed some light on the matter. I'd be happy to do so --- and I'll start with Josh's proposed example of a $100,000 home (though there aren't too many of those out there).

One Quick Assumption . . .
Upon the closed sale, Realtors are typically paid an amount derived from a percentage of the sale price of the property being sold. This percentage (the "real estate commission" or "brokerage fee") varies from company to company, from agent to agent, and can be negotiated. The sellers of all of the properties that I am currently marketing will pay either a 5% or 6% commission. Thus, for this example, we'll split the difference and use 5.5% as the sample brokerage fee.

At First You Would Think . . .
Many people would simply multiply the sales price ($100k) by the commission (5.5%) and assume that once I sell this fictional $100,000 home, I'd pocket $5,500. Could that be true??

"Sellers Agents" and "Buyers Agents"
The total commission that the seller pays is actually split (typically in half) between the Realtor representing the seller and the Realtor representing the buyer. While it is legal for a Realtor to represent both buyer and seller in a transaction, and many Realtors do so quite skillfully, it is not a practice that I encourage, as it can limit the representation that each party receives. As a result, and since in 95% (plus) of my transactions I am only representing one party, we will now divide the $5,500 by 2, and have $2,750 remaining.

The Company Has Costs Too
The remaining $2,750 is now split (again!) between the Realtor representing the seller (or buyer) and the company for which they work. Different companies have different arrangements as far as this split --- ranging from 50% to the Realtor to as high as 90% to the Realtor. Most companies are within the 50% to 75% range, so I'll average the limits of that range, and use 62.5% for our example. This leaves $1,719 to the Realtor. However, in my case, we pay a small percentage of each commission to Coldwell Banker Corporate (since we are a part of a national franchise), which actually leaves me with $1,616.

And Then There Are The Agent's Costs
If we are to compare a Realtors income to anyone else's income, we must next take out my business expenses. Last year (2007) my expenses were approximately 21% of my gross income. Some of these expenses are related to a single transaction (marketing costs, for example), and some are related to my overall business (Realtor association membership, MLS membership, office expenses, education/training expenses, etc.). Thus, the figure above ($1,616) is now reduced to $1,277.

Let's Extrapolate!
That final "profit" on the $100,000 sale was $1,277 --- which is 1.28% of the sale price. Thus, if all of the variables remained the same, here are some additional profit points:
$100,000 = $1,277
$185,700 = $2,377 (April 2008's median sales price)
$300,000 = $3,840 (a very nice home)
$500,000 = $6,400 (a very, very nice home)

Let's Compare Again
When we began, some might have made the assumption that I would have pocketed $5,500 on a $100k sale --- when in reality, I only profit $1,277. Along the same lines, someone selling a $300,000 home might think I would be pocketing $16,500 (wow!) --- when in reality, I only profit $3,840.

The Question At Hand
Returning to the original thought/question --- do Realtors make extraordinary profits? In my opinion, no --- in some transactions I am paid appropriately for the service, knowledge, marketing, representation, negotiation and expertise that I provided to my clients. In some transactions, I am underpaid. And in some cases, I provide such services to a buyer or seller for months, and am never compensated at all (if they do not buy or sell).

I hope this has shed some light on how compensation works in the real estate world (at least in my real estate world), and I certainly welcome other thoughts, questions, and perspectives!

The Virginia Association of Realtors recently released their First Quarter 2008 housing market report, entitled "The Virginia Housing Market in Uncertain Times."

Their opening paragraph provides a good summary:

The word "uncertainty" sums up the current housing market. A national recession, foreclosures on the rise, tight credit markets, potential federal legislation—all of these factors make it difficult to predict where the market is going. In Virginia, the housing market is performing better than in some other states, although certain local markets within the state are in for a rocky 2008.

The report, provided by George Mason University's Office of Housing Policy Research, is based in part on reported sales from around the state of Virginia.

The methodology is slightly different than my recent April report, but the numbers are very close.  Essentially, sales are down, but prices are up.  In the Harrisonburg-Rockingham area, the number of sales was down 21%, but the median price was up 5%, and the average price was up 14%.

For even more insight into the first quarter of home sales around Virginia, listen to this media conference call where Realtors from around Virginia (myself included), and staff from George Mason University provide commentary to the media on this recent report.

Don't miss the SVBA's 2008 Home & Garden Show. Coldwell Banker Funkhouser Realtors will again be serving hot, fresh, delicious, FREE espresso beverages (latte, mocha, etc). Just stop by our booth on the court level of the convocation center, and we'll get a drink started for you.

But wait --- even more exciting news --- this year, we have partnered with Troy Lucas at Lucas Roasting Company, LLC to provide us with a high quality, extremely fresh espresso blend to use as a base for our espresso beverages.

And yes, for those of you who don't care for these fancy (and highly caffeinated) espresso beverages, we'll also have some other options including hot chocolate, and flavored steamers.

The show hours include:

• Friday, April 4, 4p-9p
• Saturday, April 5, 10a-9p
• Sunday, April 6, 12p-5p

I look forward to seeing you at the Home & Garden Show!

We constantly hear national statistics and and stories on the news about the national housing market. On this blog, I endeavor to provide helpful analysis of our local housing market --- since it often is characterized by very different trends than other parts of the country.

But, at least for a day, I will be abandoning my local focus . . .

Tomorrow, I will have the opportunity to learn firsthand about the national housing market, and where we may be headed.

Along with four other Virginia Realtor bloogers, I will be having lunch with Dr. Lawrence Yun, the chief economist for the National Association of Realtors, who was recently named (by USA Today) as one of America's top 10 economists.

Do I know you? 

It has been great to have e-mails and comments on my blog from people that I know --- and also from people that I don't know at all.  My intent for my real estate blog is to provide a place for real estate related issues and trends to be discussed in our community.  So . . . even if I don't know you, feel free to e-mail me a question, or add a question or thought in the comments section of this, or any other post. 

Do you know me?

Some of you do --- others have never met me.  Hopefully, this blog allows you to feel like you are getting to know me better --- and to know what I think and feel about our local real estate market, parts of the real estate transaction, etc. 

To take it one step further, I added two videos to my web site today (introducing the site, as well as the searching section of my site).  You'll find these videos embedded below, as well, and I welcome your feedback.  They are, perhaps, a bit on the "serious and professional" side --- so in future videos, I'll try to let a little more of my personality shine through. 

Despite their imperfections, I hope these videos allow you to get to know me a little better.  And, as the name of my blog implies, if you'd like to get together for "Coffee with Scott" some day, just drop me an e-mail, or call me at 540-578-0102.

All About My Web Site . . .


 

Searcing On My Web Site . . .