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Who picks the contractors? Owner or agent?
Does the firm offer concierge services from preferred vendors?
^^ This is the big thing. Over the years I have hired many many contractors, and I have ended up with the short end of the stick more times than I can count. Some contractors will run with the money without doing any work, and this is in a state that requires contractors be licensed.
As for me, I have no need to borrow money, and certainly wouldn't borrow from the agent or brokerage firm in case relations sour and I need to list the property with someone else.
Instead of a loan I would really like realtors to offer fixup-to-sell services from reliable contractors, if loan was part of that OK (I would not need that part).
Just like Home Depot has contractors to install the stuff they sell (flooring, appliances). I would sign up FAST with a realtor who would be involved with light renovations (a couple thousand $) in order to get home sold for good price. Sellers are moving, that's a hard enough job without handling painting, carpeting etc.
As a seller it would be of no interest to me but I can see where it could help some. Might even tie the agent tighter to getting it sold and that could be good.
Who picks the contractors? Owner or agent?
Does the firm offer concierge services from preferred vendors?
I can only speak a bit to the program at my mother-in-law's brokerage as there are not a lot of details available about the forthcoming KW program.
My understanding is that the homeowner can use whatever contractor they want. Her firm does not force or recommend any specific contractors. She has her own "rolodex" of people she recommends to all of her customers that she has put together over her years in the industry that she recommended before this program rolled out and she continues to do so afterward and would recommend them whether you are using the loan service or not.
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Originally Posted by davebarnes
Not interested.
When we sold our house in 2011 we spent $27K getting it ready. It sold for $634K.
We paid cash.
This "RE brokerage makes an interest free loan" will only be true when interest rates are super low. Would Keller Williams be willing to do this in a repeat of 1983? I think not.
Ummmm . . . but interest rates ARE really low right now. The question was not do you think this program will be around a few years from now? I asked if it would be helpful to you and if this program would be viewed by you as a "value add."
A lot of the folks in my service area are quite wealthy and have plenty of cash to do home improvements. My thoughts are two fold . . .
1. This kind of turns the spend into "monopoly money" which would make people more likely to do it. Which often can remove the objection. Often sellers are their own worst enemies and refuse to do things that in the end would help them.
2. Even if you have the cash wouldn't you rather invest it or earn interest on it? I always take advantage of 0% financing whenever it's offered when I make a purchase whether I have the cash on hand or not. Why not?
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Originally Posted by MrRational
Is this supposed to be something new or just doing the loan formally?
This sort of thing has been getting done for decades with smaller/rough properties
in the $2-5000 range to 'clean up a mess' or eliminate a 'question mark' issue.
It's new in that the loan is formal (I believe a lien is recorded against the house) and the big difference here is that it's the BROKERAGE making the loan (or in KW's case the parent company since the local offices are independent franchises and the parent company KWRI would be making the loan). I know plenty of agents who lend money or pay for repairs for their clients. This gives clients access to much deeper pockets and gives new/less successful agents a good tool in their bag that financially they may not have been able to offer or they may not have been willing to take on the risk in all circumstances.
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Originally Posted by luv4horses
Who assumes the risk? If the house doesn’t sell can the owner change agencies? There are a lot of details to spell out. But in today’s market almost everything sells. Next year though?
What my MIL has told me is that at her brokerage you have to sign a longer listing agreement to get the loan. They do put a lien on your house. So, the risk essentially is shared by both the homeowner and the brokerage. The homeowner of course assumes the risk that after the sale there is not enough equity to repay the loan and may have to contribute cash. The brokerage is assuming the risk that the homeowner could default as any lender assumes that risk. I'm not sure what happens if the seller decides not to sell. Probably converts to some kind of conventional loan after that or maybe it needs to be paid back in full by X date. Haven't gotten all those details.
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Originally Posted by rrah
As a consumer I would have a lot of concerns and questions.
Does the listing contract differ in anyway from a non-loan contract? Does it absolutely tie me to the broker until my house sells?
Will there be extra pressure to sell at a lower price so the loan gets paid off?
What if my house doesn't sell? Where I am getting the money to repay the loan if I didn't have it to use when I listed the house?
How long is the loan interest free?
Will my sales price cover the loan and still leave me walking away with money?
Will spending this money really bring me a higher price?
While this might be a solution for some in a fast moving seller's market, it kind of feels like a payday loan situation and a bit loan sharky to me.
This is the beauty of the program. Since the AGENT is not making the loan it's the BROKERAGE, why would the agent be motivated to pressure you? We're all independent contractors and it's not our money you're playing with. Traditionally, if you were offered such a loan it would be coming from the agent and the concerns you've expressed would be valid as IMO that creates a bit of a conflict of interest.
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Originally Posted by Silverfall
I have carried small repairs, flooring costs for a client before on a listing where we needed to do it before we listed. I only do it when I am 100% sure that I can sell that property quickly for the client though. I would not do it in a slow market.
It is easier to find contractors that will bill escrow for things. So I have a flooring company that will do that. We put out some samples for the new buyer to pick and it gets done after we have underwriter approval. That way the seller doesn't have a potential construction lien hanging out there that they can't pay and the contractor isn't place in a position where they won't get paid.
Not around here. It's IMPOSSIBLE to find a contractor who would agree to be paid at closing. Too many other jobs available that will pay sooner.
See my previous comment about IMO the conflict of interest created when the agent is making the loan.
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Originally Posted by AndreaTownsley
Seems messy. I wouldn’t want to participate in that as a consumer or an agent.
Can you elaborate on that? Not sure where you're coming from.
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Originally Posted by AndreaTownsley
Also, what’s to stop investors (flippers) from taking advantage of this?
Probably nothing and why do we need to stop them from using the program?
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Originally Posted by lucy8323
When we sold our house we spent $15k getting it ready. It was sold $599k
Wouldn't it have been great if you didn't have to outlay that $15K? Would it have been a plus if while interviewing your agent they told you that you could pay for all of that at closing instead without having to limit your choices of contractor to the desperate ones who are willing to wait to be paid at closing?
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Originally Posted by Diana Holbrook
Yeah I would assume there is a payback clause if the owner does not stay with the firm.
There has to be some protection for the lender I imagine.
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Originally Posted by twinkletwinkle22
First of all I am impressed that the OP suggested painting and/or other renovations to a seller. I've sold 7 times and even when I ask for suggestions about improvements have never had any agent agree or suggest any. Maybe my properties were already in good condition?
We're prepping for 2 sales now and doing limited renovation plus painting as needed. My spouse is telling me we don't need to paint the smaller property. In his words "we bought it that way" 2 years ago so it's fine as it is. My opinion is that inexpensive improvements more than pay for themselves (of course I can't prove that).
The dichotomy of a seller getting a loan from the realtor is that it's people hurting financially that need this kind of loan, they are not great credit risks. But having the property as collateral makes the risk go away.
I agree with others who think there are some warning signs for the seller about this. Once someone loans you money the relationship has fundamentally changed.
Except the agent is not lending the money. The BROKERAGE is. Even though I fly the KW flag, I make all the decisions about how my business is run. They just offer me tools like this one to help me run my business. I used to fly another flag and when I did I still made 100% of the decisions.
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Originally Posted by oh come on!
do they still pay you for the home improvements if the home doesn't sell?
The improvements are paid for when the invoice is received. I don't know what happens with the loan if the seller decides not to sell. I'll have to ask my MIL.
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Originally Posted by AndreaTownsley
This is another issue. Some flippers operate on tight margins already. What if it doesn’t sell at the price they need to pay off their loans? Who has first priority on the loans? Will the brokerage place a lien?
Yup. There is a lien. Seller would need to come to the table or negotiate a short sale. No way a mortgage lender is going to allow a RE brokerage to be 1st lien holder though. In the event of a foreclosure the brokerage would probably get paid last.
Quote:
Originally Posted by twinkletwinkle22
Instead of a loan I would really like realtors to offer fixup-to-sell services from reliable contractors, if loan was part of that OK (I would not need that part).
Just like Home Depot has contractors to install the stuff they sell (flooring, appliances). I would sign up FAST with a realtor who would be involved with light renovations (a couple thousand $) in order to get home sold for good price. Sellers are moving, that's a hard enough job without handling painting, carpeting etc.
If your agent doesn't have a "rolodex" of recommended contractors for you then you need to find yourself a new agent. I actually have an app I give all my clients with a curated database of contractors many of whom have worked on my own home. All have been thoroughly vetted though.
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Originally Posted by johngolf
As a seller it would be of no interest to me but I can see where it could help some. Might even tie the agent tighter to getting it sold and that could be good.
Again, AGENT and BROKERAGE are always two separate entities. This is something the public doesn't understand. I don't work FOR my brokerage. They're supposed to work for ME if anything.
As I said earlier, wouldn't you rather take advantage of the loan and keep your money working for you in the market? This might also help reduce your tax exposure if you're recognizing a large gain (although check with your accountant as I am not a tax expert).
IMO, this is a great tool for sellers to take advantage of.
Location: Danbury CT covering all of Fairfield County
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Too much liability and exact terms to be spelled out. When I meet with the seller, they usually ask what they should or shouldn't do prior to listing, and if needed, they get a couple of trades professional recommendations from me but they are free to screen & hire anybody.
So, I'm just wondering . . . all other things being equal would the offer of such a service be a plus to you, the consumer? Would you hire one agent over another (again all other things being equal) because of this?
It’s a great idea, although it’s hard to imagine people so cheap, they can’t paint a couple of rooms. I spend time perusing realtor sites like Realtor.com and Zillow, and there are a fair number of houses where you have to wonder if the seller is even interested in selling. Dated wallpaper is a classic, or garish walls, and it takes so little effort to clean up that look with fresh paint.
This service would make a big difference to me as a seller, if I couldn’t or wouldn’t make changes. It’s not hard to understand that of two houses in same area and sq footage, the one with fresh paint and de cluttered, will sell for more and faster than a tired, cluttered house with tacky wallpaper. I’d definitely hire the agent who offered this service, if repairs were needed.
Too much liability and exact terms to be spelled out. When I meet with the seller, they usually ask what they should or shouldn't do prior to listing, and if needed, they get a couple of trades professional recommendations from me but they are free to screen & hire anybody.
I'm not sure I follow your reasoning.
Every seller I meet with wants me to tell them what to do to get their house in a condition where it will sell for maximum sale price (of course recommending only project with a reasonable cost:return ratio). Some have relationships with contractors already. However, many want recommendations as well.
If you met with a client who balked at doing improvements prior to putting the house on the market, wouldn't you want a tool like this that removed that objection so that you could better serve your client? People can sometimes be unnecessarily frugal causing them to be their own worst enemy. This could really help a lot of people IMO.
Currently, I have no idea what the exact terms are for the KW program and I only have a rough idea how the program works at my MIL's brokerage. However, I'm sure that would be spelled out to any client wanting to use this service and I would expect there would be training ahead of time so that I could prime the client as to what the pluses/minuses of the program are.
Like any service I offer, it will be right for some not for all though.
If you met with a client who balked at doing improvements prior to putting the house on the market, wouldn't you want a tool like this that removed that objection so that you could better serve your client? People can sometimes be unnecessarily frugal causing them to be their own worst enemy. This could really help a lot of people IMO.
Yes, I very much agree. Aside, I don't like the sales-speak of removing or handling objections, though. It solves a problem.... That's why it's a good idea.
Current example: Client has a dishwasher that is broken. May be able to be repaired, but should probably be replaced. This is not more than a $600 problem probably, but seller is tapped out with expenses. Now it becomes something that reduces her price in negotiations, probably by more than the cost of the item. Buyers do tend to round UP. This kind of service might help.
I'm not the person to ask. I'm not the typical house seller who maybe sells two houses in their lifetime. I suspect that the people here on the C-D real estate forum are not typical house sellers. At least, they don't seem to be.
And I'm terribly cynical about real estate. I am well aware that everyone who even glides by close to my house is trying to dip into my pocket in some manner when the house sells. So my first thought is "what's in it for the broker?" It seems a very high risk loan for not much advantage.
I'm guessing that the service might be useful to senior citizens, to people with bad credit, and to people who are forced to sell due to some financial disaster or another. Fresh paint really makes a difference when a house is put on the market and maybe some people can't afford to paint.
I've had some real estate agents recommend some really crazy things that they thought would help to sell a house. I'll listen to them, but mostly, I think they don't really know what they are talking about and they don't care about the bottom line for their seller. I'm not interested in taking out a loan to do improvements that won't pay me back.
Yes, I very much agree. Aside, I don't like the sales-speak of removing or handling objections, though. It solves a problem.... That's why it's a good idea.
Yeah. In my mind, an "objection" is the reason you are given when you present a solution to a problem and someone refuses to enact it. Often, the reason is not entirely logical or truthful. So to me, the solution and the objection are separate things. Although, I guess you could look at the objection itself as a problem as well.
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Originally Posted by Diana Holbrook
Now it becomes something that reduces her price in negotiations, probably by more than the cost of the item. Buyers do tend to round UP. This kind of service might help.
Couldn't agree more. There are some crazy agents out there who think if they bring in the most expensive trades person in the world that he seller is automatically going to agree to hand over every penny of equity in their home.
Last week I was negotiating an inspection. The agent said their electrician quoted $6200 for some minor repairs to the circuit breaker box and the electrical service. I've gotten quotes to replace the entire service from the utility pole down down to and including the breaker box for far less than that. So, no way was $6200 for the repairs they listed reasonable. They were clearly padding all of their numbers. They asked for money to repair the pool as well. I happen to be there when the pool guy came. He quoted $1400 max for the repair and when their repair list came back it said $1800 for that item.
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Originally Posted by oregonwoodsmoke
And I'm terribly cynical about real estate. I am well aware that everyone who even glides by close to my house is trying to dip into my pocket in some manner when the house sells. So my first thought is "what's in it for the broker?" It seems a very high risk loan for not much advantage.
My only guess is more money. If the broker's agents win more listings then the broker makes more money. It's another talking point when you're trying to bring more agents under the roof as well. "Hey! Let me tell you about this great tool you'll have if you move over here that will help you win listings!"
Quote:
Originally Posted by oregonwoodsmoke
I'm guessing that the service might be useful to senior citizens, to people with bad credit, and to people who are forced to sell due to some financial disaster or another. Fresh paint really makes a difference when a house is put on the market and maybe some people can't afford to paint.
Personally, I think it's a service that a lot of people would use regardless of their financial status. I can't tell you how cheap some incredibly wealthy people are.
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Originally Posted by oregonwoodsmoke
I've had some real estate agents recommend some really crazy things that they thought would help to sell a house. I'll listen to them, but mostly, I think they don't really know what they are talking about and they don't care about the bottom line for their seller. I'm not interested in taking out a loan to do improvements that won't pay me back.
I think you hit the nail on the head there with your assessment. You called the wrong agent. Not all of us are good at what we do and in my experience some of the most successful agents are those who actually care the least about their clients.
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