At Home in LaGrange County Indiana

Are You Avoiding Your Lender?

All those phone calls and letters- It is human nature to avoid the unpleasant.  It can be hard to admit when you need help or are unable to live up to the expectations you have set for yourself.  The first step in the right direction is a call to your lender.  Do it today!  Find your monthly billing or coupon book, locate the number, and call your lender. 

Lenders Can Provide Options to Foreclosure

If you lose your home, it is very costly to your lender. In addition to the loss of anticipated interest income, the foreclosure process is time consuming and expensive.  It is in their best interest to work with you to resolve the problem and keep your loan on track.   The cause of your current financial situation and the possibility of it improving will determine the lender's options which may include:

• Allowing you extra time to make up a late payment
• Spreading missed payments out until they are repaid
• Changing the terms of your loan through refinancing. You can restart the 30 years, change to a fixed rate loan, or lower the interest rate.
• Adding the missed payments to the unpaid balance of your mortgage

Some financial situations may be due to an unexpected hardship such as unemployment, divorce, illness, accident, death, or bankruptcy.  In these cases, lenders are more likely to be receptive to working out the problem with you and helping you keep your home.

Help Yourself and Maintain Your Good Credit

Sometimes we get so caught up in the situation that we don't realize our options.  If you can't afford to stay in your current home, here are some choices that others have made to help them preserve their good credit:

• Sell your current home and downsize to one that fits your new financial situation.
• Rent your home out to cover the mortgage payment.  If you can't get enough to also cover a rental for yourself, a temporary move into the home of family or friends can help until you are back on your feet.
• Maybe you could stay if you find a roommate and split the mortgage and utility costs.
• If your loan is assumable, find a buyer for your home that will take over the loan.

What If You Owe More Than Your House Is Worth?

The combination of the current housing market, adjustable rate mortgages,  and  little or no down payment loans has put many homeowners in this situation.  If it is impossible to keep up and stay in your home, you have options to foreclosure, but they will affect your credit.  Some can also result in you still owing the bank.

• A pre-foreclosure or "short sale" is when the bank agrees to accept less than what is owed in order to avoid the foreclosure process.
• A deed in lieu of foreclosure is when you give back your home without forcing the bank to foreclose.

You Are Not Alone

Sometimes it is comforting to know you are not alone when facing a stressful situation.  If you are facing foreclosure, you are NOT ALONE.   The rate of foreclosure in this country, and in our county, is higher than ever.  Foreclosure has affected many homes and families.  It has hit neighborhoods of small starter homes as well as high priced lakefront properties.  It has hit homes in the city and in rural areas.

For detailed information on the above topics and contact information for local help, you can visit the Department of Housing and Urban Development.  A good place to start is this page which offers  Help for Homeowner's Facing the Loss of Their Home.

Let Me Know If I Can Help

If circumstances force you to sell your home, I will do everything I can to help you through this process.  If your only solution is a short sale, I will take the extra time required to coordinate this type of transaction with your lender.

 What is currently on the market?

 My time with home buyers and sellers has taught me that many people don't understand how agents are paid. I've had people think we get paid for every showing or that our company pays us a salary and a commission.  The majority of real estate agents work strictly on commission and are independent contractors (self-employed) and work for a principal broker (office).  We are only paid when a home sells.  We spend time in unpaid tasks  with customers providing information and showing homes.  Once we represent a buyer or seller as a client,  the investment of our time and money will only pay off when we are successful in closing a transaction. 

The method in which agents are compensated for their work  can vary by region, company, and the type of client representation. Most of the time, a buyer doesn't pay anything for the services they receive. An exception can be when an exclusive buyer's representative charges a fee to find a buyer a home. Usually, it is only the seller who pays and it is a percentage of the selling price paid to the office that listed and sold their home. This percentage is always negotiable and can vary depending on the level of service the office (if there is one) and the agent provide. One company may charge a 2% fee online, mail you a sign and put your house in the MLS. Another company may charge 2 to 5 times that amount and provide a different level of service. It is a seller's decision to decide on the level of service they want and are willing to pay for.  For purposes of this example, I am using a home that sold at $175,000 at a commission rate of 7% or 12,250.00 in commission. 

The second part of the myth is that listing agents  receive this entire amount. First, the principal broker (office) that brought the buyer will usually receive 1-4% of the selling price (this can also vary by region and office) from the 7% selling commission to compensate the buyer's agent.   This commission sharing or (Co-op)is offered through the MLS and is how sellers receive the benefit of having every agent in our four county area working to find a buyer for their home.  I'll use 2.5%, which gives the buyer's office $4375 and  the seller's  office 7,875.

The next split is between each principal broker (office) and the agents. This also varies depending on the level of services the office provides the agent. This can include the office itself (building, utilities, insurance, staff) as well as who pays for advertising, equipment, supplies, etc. A franchise office may also pay back a percentage of what the office earns in franchise fees.  Some agents receive all of the commission and must pay monthly or per transaction fees to their office. For purposes of our example we'll split it evenly between the office and the agent.

This leaves the seller's agent with 3937.50 and the buyer's  agent with 2187.50.  Then come the taxes.  As independent contractors, we pay self employment tax of 15.3%, federal income tax of 28%, Indiana income tax of 3.4%, and LaGrange County income tax of 1.4%. So the net pay received from the sale of a $175,000.00 home by the  seller's agent in this example  is 2,043.55 and the buyer's agent is 1,135.30.

And just like any other business, there are expenses. Some have portions which are tax deductible.  Common agent expenses include:

Advertising in newspapers and guidebooks

A recent make and model automobile, car washes and servicing, lots of fuel, and insurance with extra coverage for driving with clients.

Computer, software, online service, printer, fax machine, copy machine, camera, office furniture, as well as paper supplies.

Educational seminars and mandatory continuing education

Dues to organizations- some are required, some are necessary to promote your business and your listings

Annual dues to National, State, and Local REALTOR board as well as monthly MLS fee and our licensing fee.

As we are always on call, many agents also have a home office in addition to the business office, more office equipment, furnishings, and utilities.

Insurance/Retirement-we pay for our  health insurance, liability insurance, and retirement plan.

Marketing- signs, fliers, flier boxes, business cards, postcards, website.

Phones- at the office and at home, long distance, voicemail, and our cellphones and service.

Postage for correspondence and marketing listings

Professional Fees for accounting, legal work,  and printing

Wardrobe and drycleaning

Some of these expenses are spread among all the transactions in the year and will remain the same regardless of how many homes are listed and how many sell. Every listing taken will require the risk of the upfront investment of time, advertising, marketing, signs, and supplies. The longer it takes to sell a home, the more it will cost the agent. If it doesn't sell, an agent doesn't get paid or reimbursed at all.  When working with buyers, an agent only gets paid when a home is found and the sale closes. The risk with buyers is in spending time driving and showing homes to those who are just looking and don't buy a home or those who have several agents working for them and buy with a different agent.  This is why agents prefer working with people who will go to a lender and get pre-approved (this shows they are motivated to buy) and why the best buyer client is one who has signed an agreement to work exclusively with one agent (this shows their loyalty to their agent).

It is easy to understand why consumers get the impression that agents are overpaid. Some think we receive the entire commission.  Also, most of the work we do is behind the scenes.  Here is a list of nearly 200 typical tasks an agent performs when listing a home.  When working with buyers, we help them with financing from finding a lender to approval.  We perform daily searches of available homes to find the ones to tour.  Once a home is found, there is research, inspections, steps to final loan approval, contract deadlines and transaction coordination until closing.

Agents must convey success and professionalism to attract customers, so they wear nice clothes, drive nice cars, and spend plenty of marketing dollars promoting themselves and their successes.  When they advertise themselves as “Million Dollar Producer” and “Multi-Million Gold Key”  these are figures based on the selling prices of all their transactions with buyers and sellers in a year, not the actual commission they received. There are some extremely successful agents, but to find an agent who is actually earning anywhere near a million dollars in commissions, it would be in a market with an extremely high number of homes sold each year and sale prices that far exceed those in LaGrange County. (a major city in California or an oceanfront community)   The national median gross annual earnings of all Realtors in 2006 was $47,700.  This is a goal for me to work toward as I build by business.  For me, the reward in my job is that I enjoy what I do.  I get to meet new people and help them through the lifechanging experiences of buying or selling a home.