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I'm confused with the math.
The $40k is coming from the estimated closing costs plus the $20k you feel like you are losing based on the realtor's number and the Zestimate, correct?
Zestimates are rarely accurate, so stop counting that $20K as a loss. It isn't a loss. It was never there.
Selling, assuming it will sell for $160K, you should be left with roughly $145K after realtor fees and any potential closing costs.
I'm confused with the math.
The $40k is coming from the estimated closing costs plus the $20k you feel like you are losing based on the realtor's number and the Zestimate, correct?
Zestimates are rarely accurate, so stop counting that $20K as a loss. It isn't a loss. It was never there.
Selling, assuming it will sell for $160K, you should be left with roughly $145K after realtor fees and any potential closing costs.
The difference between what we owe and $160,000 is $20,000.
To understand the real estate business you need to understand the facts of the business. Here is a cold analysis of the business.
1: In an average year, less than 15% of agents, will sell 85% of all real estate. The other 15% is divided up among all of the rest of the agents in the business. If every agent was equal in sales, the agents would each make less than 3 sales per agent to simplify things by dividing total sales by number of licensed agents. A large percentage of agents that do make a sale or two, end up not even making enough to cover their expenses.
2: Around the country 75% to 90% of all real estate agents, fail out of the business in less than 1 year, leaving as soon as they run out of money paying the expenses, without enough income to cover their expenses. The majority leave within 6 months to a year.
3: Median income for agents is, $39,757. The very top agents will exceed $100,000 per year and a huge number will make -$0.00 per year. Remember all these agents have a lot of expenses, that are deducted from their total income, so the median after expense income per agent that produce some sales, can be considerably less than $30,000 per year. And a lot of them may make no income for the year, and leave the business.
The problem buyers and sellers have, is finding one of the better agents. A lot of sellers see poor descriptions with their listings, and bad photography. The problem is the agent is not experienced enough to be know how to properly describe the property, and take the photos with their cell phone. They simply cannot afford to hire a professional photographer, or do as the better agents that take good pictures have a quality camera with the right lens to do the photos.
The problem in the business, is that someone wants to be a real estate agent as they see it as a way to get rich selling real estate. They take the course to pass the test, and that is their full knowledge of the business. It does not teach them how to sell real estate. They are hired by a broker, that shows them a desk to use, hands them some listing and selling contracts and says go find some business. They try to look and act professional, but truthfully know nothing about how to do business. They spend all their savings without making enough sales to cover their expenses and leave the business.
In 1971 I decided it was time to leave the corporate world (I was division sales manager for the Western Half of the U.S.) I had 20 years sales experience, and knew the problem most new agents have is not understanding the business. I chose investment real estate not selling homes for the owners to live in. I went to school taking night courses at a major university, plus some privately taught class taught by national experts. At the end of one year, I was ready to try the real estate business.
Day one in the business a Monday, I sold a 2 year old apartment quality apartment house to a former co-worker. The next day took on a listing for the identical apartment house next door, and sold it on Thursday. The following week of work, made a 1031 tax deferred exchange of a 5 year old 16 unit apartment house for a large irrigated farm. My commissions from those 2 weeks sales, put me in the top 10% of real estate agent incomes in the country. From then I really got into real estate brokerage, and started a great sales business. I took the brokers test early on (the education I had taken qualified me for becoming a broker without having to be in the business 2 years. Opened my office, and the first day I listed a nice country apartment house, and took 2 homes and a duplex in trade on the apartment house that same day in my new office. I stayed in the business until I finally retired. I did some development, had some buildings built for clients, etc. and often acted as a principal as there was an opportunity to make a lot more than being an agent. Did some syndication on projects. Exchanged property around the west, and as far away as in Belize and Costa Rica. My wife was a para legal, and she managed my office. Took the needed university classes so she could take the brokers test without having to be an agent first. I handled the clients, and she handled the paperwork an agent normally has to worry about. Only agent I ever hired, was my daughter who got her license and worked for me summers off from going to the university. WITHOUT TAKING THE COURSES TO LEARN THE REAL ESTATE BUSINESS, I WOULD NEVER HAVE BEEN SUCCESSFUL.
I am telling you my background, because I had just as much problems working with a lot of agents that did not understand what was needed to make real estate transactions happen. A lot of them would have screwed up sales as much as a lot of posters are having, and only because one of us knew what I was doing, were we able to make a lot of the transactions I made.
If you want results in selling or buying real estate, find someone that has been in the business for at least 3 years, and has survived and prospered. Interview them the same as a prospective employer does people they are considering hiring. Don't just rush in, and list with just anybody, and do not just go out to buy property without doing the interview. We have all seen the horror tales from both buyers and sellers, due to having an agent that did not know what they are doing.
I only ever wrote one sale that did not close. It was for a commercial river front property in a top quality town. It was down half a flight to a garden level office section, nice looking building. Up half a flight to another floor of offices. There was a separate entrance and a nice wide stairwell up to the third floor which was apartments. The bottom floor was all vacant, and the agent/owner said she was leaving it empty so the new owner could select their own tenants. The price was really a bargain, and the owner was selling and moving home to England where she was from.
I tied it up as part of a 5 way tax deferred exchange. I did some research and found they had just named that area a potential flood zone, and the bottom floor could no longer be used for offices was the reason it was vacant. It now was no longer financially feasible as an investment We cancelled the sale, and she fled the country abandoning the building and let the lender have it.
Reason I did not have sales that did not close, is I only worked with clients that could get any mortgage I wanted for them. Clients that completely understood what we were doing, as I educated them to where there was no doubts.
My advice from the inside is, Always interview your agent or broker when either selling or buying. Find out how long they have been in the business, and how many sales they have made in the past year. How they will market your property if you are selling. If you do not get satisfactory answers, move on and find another agent or broker.
Some solid advice above. My experience says with the typical 6% realtor fees the bottom line selling cost will be about 8-9% thus on $160K, $13K to $14.5K and that is off the top of the $160K.
We count on spending about 10% to sell our homes. 6% on the realtor, and around 4% on painting, repairs, cleaning... Sometimes a little more.
Thank you, everybody!! This whole thing is really overwhelming (and, truth be told, depressing). Having some guidance really helps. xx
I know how that feels. We refinanced at the height of the market, as such we have been stuck here waiting for prices to rise. Zillow says my house is worth $175,000, but comparative sales (very close by and accurate) say it would go for about $160 to 165k. We owe $157k, but after closing costs we probably won't make a dime but rather owe money.
Thus the quandry of certain markets; You can buy for a decent price, but good luck selling.
Good luck! We could all use some! I'll be selling this house in 4-6 months...and I'm HOPING we can break even
We've never sold a house before, so treat us like the dummies we are. I'm already confused and we haven't even really started the process yet. There's a big disparity between the Zillow estimated cost of what our house is supposedly worth ($180,000) and what our (very tentative) real estate agent is telling us we could sell it for ($160,000). He's also telling us we'd be stuck paying all the closing costs which would be another $20,000. This means it would cost us $40,000 to get out from under this house (we've been here seven years). I understand that we bought high and the area we're in hasn't quite recovered, but it's supposed to be a seller's market right now--am I missing something here????
Also, how many real estate agents does someone usually consult before they pick the one they're going to go with. I'd really like a few more estimates of what we could reasonably get for the house. We're in a nice neighborhood and definitely not the most expensive house on the street. It doesn't seem like it should take 40K to get us out of here.
Zillow is about as accurate as I am. I know nothing about real estate outside of my area so my guess would be as good as Zillow's. Zillow doesn't know anything about your house except what the public records say. They know nothing about your upgrades, neighborhood, etc. It's all a computer model. They claim my house is worth $50K more than it really is. Don't put ANY faith on anything Zillow has to say.
In most areas, sellers pay many of the closing costs, but not all of them. If you bought when the market was high in your area, then that's on you. As for it being a seller's market, that is totally area dependent. Some neighborhoods are hot. Others are about as warm as frostbite.
We sold our house this past May. We found our realtor by going to open houses. I like how handled it and she showed us how many sold she sold in the past year, how long they took to sell and what she would do for us to sell our home. Before listing our home she sat down with us and showed us comparable sales in the area. She also brought in a stager to tell us what we needed to do to the home to get it ready (remove clutter, take down pictures, move furniture a certain way, etc).
As far as fees. Typical realtors take 5-6% commission. Then there's property tax credits to the buyer, lawyer fees, commission, etc. Your realtor should be able to give you an estimate on all the sale fee's you will need to pay and what your net will be.
As others have already stated....Zillow only goes by square footage and number of bedrooms and bathrooms. It doesn't always pull the nearest and most recent sales. It doesn't know finishes and if there is a 2 car or 3 car garage, finished basement, patio, fence, etc. Your realtor should be able to give you a solid figure on what it should be able to sell for. The appraiser will be exact. Good luck!
Thank you, MikeJaquish and GotHereQuickAsICould for two invaluable posts!
+1
Both wrote excellent posts, practically each a treatise. Both covered it all and I have little to add.
I suggest interviewing 3-5 real estate agents, then use your common sense and judgement of people to decide. Do not base your choice on what they tell you they can get as your selling price. I can get you $1M... Do you want to hire me? (I'm not even a real estate agent.) Just making a point.
Please understand that commissions can be negotiated. If they tell you 6% ask them if they can do it for 5%, etc.
Remember you will be stuck with your choice so pick carefully. They will want you to sign an exclusive representation agreement (ER) and you are committing to using them and only them until your ER expires, which could be as long as 6 months.
Zillow estimates are the same thing that comes out of the south end of a northbound horse. If they get the right price it is solely an accident. Yet if you took 1,000 Zestimates they might average out to be near the true values, but never for one home except by accident.
Zillow is good for one thing, and that is looking at pictures of houses, so that you can see what they look like. That's about it. Almost all of their data is incorrect and you can't go by any of that on their website.
To give you an example - when I looked at my own current house just out of curiosity a few years ago, I saw that they have it listed as sold, just a few years after we bought it, for a MUCH lower and ridiculous price - many thousands of dollars less than what we originally paid for it and many thousands of dollars less than it is actually worth. These aren't the actual numbers or years, but to show you what I mean - say I paid $500K for it in 2008 and it's still worth more or less about the same. They had it listed as sold in 2013 for $350K. It took me a while to figure out what happened and how they came up with that figure, etc. Turns out, I remembered that I had refinanced it to get a shorter term and lower interest rate. They didn't know that fact, so they just put that it had sold for that price. I knew it was wrong, because I hadn't sold it and I still haven't moved from this house. It hasn't even been for sale or on the market since I bought it.
Hope that helps!
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I'm already confused and we haven't even really started the process yet. There's a big disparity between the Zillow estimated cost of what our house is supposedly worth ($180,000) and what our (very tentative) real estate agent is telling us we could sell it for ($160,000). He's also telling us we'd be stuck paying all the closing costs which would be another $20,000. This means it would cost us $40,000 to get out from under this house (we've been here seven years). I understand that we bought high and the area we're in hasn't quite recovered, but it's supposed to be a seller's market right now--am I missing something here????
If they get the right price it is solely an accident. Yet if you took 1,000 Zestimates they might average out to be near the true values, but never for one home except by accident.
