Real Estate: A Few Rules of Thumb

Who Pays Which Fees:

Remember that all fees are negotiable and depend on the current market climate. For example: if there is a shortage of inventory and home prices are increasing, then the leverage shifts to favor the seller (seller’s market). On the other hand, if there is a high REO saturation (bank owned properties) and a large number of homes on the market, then the buyer will have more negotiating power (buyer’s market). The buyer usually gets to choose which title company will complete the escrow process, but currently the market is experiencing an inventory shortage (this is the case across the country). This means that sellers are typically writing counter offers, and changing the title company along with a few other terms in the contract (such as price, close date, etc.).

The Seller:

  • The agent fees. Typically a real estate agent will list a home for 5%-6% of the home’s selling value. The agents usually split the fees, 3% to the listing agent and 3% to the buyer’s agent. Often times the listing agent (with the seller’s approval) decides on how the agents split the commission, and can take 3.5%  while offering 2.5% to the buyer’s agent.
  • If the home is located in an HOA (home owners association), the seller must purchase the resale package(s).

The Buyer:

Both the Buyer and the Seller:

  • Typically the cost of escrow is split 50/50.

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How to Calculate the Value of a Home:

I have been working for a real estate appraisal management company for the past two years. On average I process 60-100 Broker Price Opinions per day, for homes across the United States. I have personally found that Zillow’s online estimate (Zestimates) is a good indicator of a property’s value. From my experience, the Zestimate tends to value homes on the higher side, so I use it as the “maximum value” that a property is worth. The tax assessed value tends to be a good indicator of the lower limit of what a homes is worth. Depending on the area, the tax assessed value can be dramatically different than the actual market value of a home (California is one example of a state that assesses the taxed value much lower than the actual market value of the home). The value tends to reside somewhere between the price of the average sale in the area (homes with similar characteristics within 1 mile), the Zestimate, and tax assessed value.

Are you looking to purchase or sell a house? If so, where and are there any questions you have about the process? Comment below!

 

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How to Become an Expert: 10,000 Hours Over 10 years

According to Malcolm Gladwell, the author of “Outliers“, 10 hours over 10 years makes you an expert. There has been a lot of controversy around this research, but one thing is for sure. If you practice one thing for 10,000 hours, you will be at least very well versed in the subject and/or quite good at performing that task. In a prior blog I discussed how there are 168 hours per week, of which work consumes 40 hours, and sleep takes up 56 hours (8 hours x 7 nights). This leaves us with 72 hours to live “Your Life”. Is there a talent, hobby, or new career path that you would like to study or make progress on? This blog post shows you how to break down a big goal (like 10,000 hours of practice) into a manageable plan, to become an “expert” or at least “very competent” at that skill.

Knowledge-sharing

Assumptions:

  • 10,000  hours ÷ 10 years= 1,000 per year

Calculate the number of hours of practice you have at your current full-time job:

  • 5 days per week x 8 hours per day = 40 hours per week
  • 5 work days per week  x 4 weeks per month x 12 months = 240 work days
  • 40 hours per week x 4 weeks per month x 12 months per year = 1,920 hours in practice of skills that you currently use for your job.

Calculate the number of hours you will need to practice per day to gain 1,000 hours of a skill per year on your own time (not during work hours):

  • 1,000 hours ÷  240 days = approximately 4 hours per day 5 days per week or
  • 1,000 hours  ÷  365 days per year= approximately 2 hours and 45 minutes per day

Personal Example: What Makes me Qualified to Write About Real Estate?

I have been involved in the real estate industry since 2010. I obtained my broker’s license in California (2010) and in Nevada (2011). I started my career working for Regency Centers, a publically traded company, in the leasing department (commercial strip malls and neighborhood markets). In 2011, I moved to Las Vegas to start and run a company in the hospitalities industry (for more information on this topic, visit the “About Me” page). While I was working on my company, I sold residential real estate for my 9-5 job. I worked as an agent in a team setting, and then became a transaction coordinator for one of the top producing agents at the number one real estate team in Las Vegas (Shapiro&Sher Group, Berkshire Hathaway Home Services). During the time that I worked at Shapiro&Sher Group, they sold $220 million in volume. I have purchased and flipped my own home, and have been working for an appraisal management company assessing real estate values 3 days per week from 2016-2018 (while obtaining a Masters degree in Business Administration).

Breaking Down My Real Estate Experience:

2011-2014: I worked in the residential real estate industry for 3 years x 1,920 hours per year (see assumptions)= 5,760 hours of residential real estate sales practice.

Plus…

2016-2018: 3 days per week x 8 hours per day x 4 weeks x 12 months=1,152 hours per year  x 2 years = 2,304 hours of real estate valuations practice.

Total Number of Hours Practicing Real Estate: 5,760 + 2,304=  8,064 hours of real estate knowledge.

Keep in mind that the number above is a very conservative number. I am not counting any knowledge gained during the time that I worked in commercial leasing, or when I switched my schedule to work full time on running my company (Select Lockers). I am also not including any of the knowledge I gained over the past 3 years from being a part-owner of a large multi-use high rise building in Chicago’s prestigious financial district (I re-invested a large portion of the gains I had made from the sale of my company).

As of today, I have been in the real estate industry for 8 years, and have about 8,064 hours of practice. I am by no means an expert, but I am on my way to 10,000 hours of practice in one subject matter over 10 years!

PracticeBecoming an expert is possible:

  • 10,000 hours ÷ 10 years = 1,000 hours per year
  • 1,000 hours ÷ 12 months= 83 hours per month
  • 83 hours ÷ 30 days =2 hours and 45 minutes of practice per day

Steve Jobs, Oprah Winfrey, you, and I all have the same number of hours on this planet. What are you doing with your spare time?

Is there something that you would like to become an expert in? Is there a new career path or passion that you wish you could master? If so, comment below and tell us what you are doing and how you plan to get there!!!

 

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