Real Estate Mistakes (book)
This is a fantastic book written by Neil Jenman; founder of the Jenman group. What I love about Neil Jenman is that, an agent himself once, he is genuinely passionate about ethics in real-estate: making sure neither the buyer nor seller is screwed over (by fault of the agent), and that "everyone wins". I also like that the book is split into two main parts (buying and selling); and you'll notice I've only summarised the buying part.
I wrote this summary to remind me of the main points I took away from the book, but keep in mind you may have highlighted very different points. The book is full of great advice, and finishes with a wonder message, and I'd highly recommend buying and reading it before buying or selling your first home! His first book "Don't Sign Anything" is also very good.
PART ONE: BUYING A HOME
Chapter One: Your Money
- The first aim of all families should be to own their family home, debt free.
- Nothing beats the feeling of owning your own home.
- Be careful not to join the "now" generation; those people who want everything today. They see loans as "free" money - not the price they will have to pay in years ahead.
- People often buy to compensate for feelings of inadequacy and to appear successful.
- The word mortgage comes form a French word "mort" and means "agreement until death".
- Buy a home you can comfortably afford.
- Ask: what features could I do without.
- Work out how much a home would cost if you bought based on your needs only.
- Beware hidden costs:
- Know stamp duty for your state (in Qld is only stamp duty if home >$500k).
- Inclusion costs: good rule of thumb is basic inclusions cost at least 10% of purchase price if home is empty or 3% if home is established.
- Unexpected welcome costs/calamities: eg: the hot water system blows up or roof suddenly leaks.
- Running costs: rates, insurance and regular repairs add up: very few homes can be maintained for <$150 a week. That's another $8000 in extra costs per year.
Chapter Two: Your Purchase
- Decide which is most important to you: the home or the price.
- It is unethical for an agent to under-sell a home.
- Arrange to meet the agent to talk about what you want.
- The best agents will make an appointment for you to inspect homes, usually 3-4 to begin with, to get a feel for your personal tastes.
- When looking at homes you will cut your stress in half if you always take your partner with you.
- Take a cheque book in case you see something you like an need to pay a deposit (this also show the agent you are serious).
- Be sure to tell the agent how you feel about each home you see.
- Buying a home (especially an established one) involves compromise
- It can be disheartening when agent tell you there is "nothing around" or "too many buyers".
- The best thing you can do to find the right home is to find the best agent in your preferred area.
- The Instinct Rule:
- The right home for you has the right "feel: to it.
- Never buy a home unless if feels right.
- If you become fed up with looking for homes, there are two things you can do: (1) consider another area or another price range or (2) take a break.
- The right time to buy is when you find the right home. Not before.
- Don't lose too much time though procrastination. In the case study Neil gives a man takes 15 years slowly thinking about buying and misses two real estate booms and paid thousands in rent.
- Sometimes we all need a push to do the right thing for ourselves...
- Some homes are "rouge homes" - noisy neighbours or smells from industrial complex etc.
- Meet the neighbours before you buy.
- One of the biggest rules in home buying is: know the home before you buy it.
- Make sure you hire competent and profession people to inspect a home before you buy - and be prepared for the most negative and "picky" lists of faults you've ever seen.
- The legal process for buying and selling a home is too important to cut costs.
- What you are a really paying for with a lawyer is peace of mind.
- Most buyers feel jittery or even ill the day after they agree to buy - this is a natural feeling called "Buyer's Remorse".
- Best thing to do is wait a few hours, write out a list of the things worrying you, then sleep on it. The next day write out a list of the positives... some good reasons for home-ownership are: (1) it feels good to own a home (2) emotional security (3) financial security (4) family togetherness (5) it occupies and becomes part of your (6) it takes care of you (7) it builds memories (8) your home is you.
Chapter Three: How Buyers Save Thousands with Typical Agents
- "Just sell it and get the commission" is the attitude of most typical agents.
- Four questions which can reduce the price:
- (1) "Why are they asking this price" (say nothing else - it puts them on defensive)
- (2) "Why are they selling?" (incompetent agents can reveal the seller's confidential reasons for selling)
- (3) "How long as it been for sale?" (the longer it's been for sale the more likely it is to sell for a lower price)
- (4) "What will they take?" '
- More questions:
- "Have the owners had any offers?" '
- "How much were the offers?" '
- "Who put the price on this home?" '
- "What did you use for a comparison on this home?" '
- "How much do you think it will sell for?" '
- "What would you pay if you were the buyer?" '
- "When do they want to move out of the home?" '
- "What inclusions are they leaving behind?" '
- Buyers cannot be blamed for low offers. Incompetent agents are to blame.
- If you are inexperienced at home buying, you whould avoid auctions altogether. Neil has listed lots of great rules for auctions, but since I have no interest or confidence in auctions I have left these out
- Making an offer to buy:
- The one thing you should alwsy do, no matter how you have been treated is to be fair and firm. If you play games you will antagonise the sellers and may lose any chance of burying the home.
- If you pay a 10% deposit to the agent you'll have a much better ehance of your offer being accepted than if you pay a hundred dollars.
- If the sellser want to stay in the home for a few more weeks you could allow them to rent it back from you. Look for anything that could be an incentive to accept your offer.
- If you intent to increase your offer later, never say "this is my best offer". Just say: "this is my offer", then put it in writing a leave a cheque as a deposit, and include a resonable time limit by which you require a decision. Three working days is ample time for an offer to be considered.
- Never tell agents your maximum price - agents have then an ethical duty to get this amount from you (although many wont).
- TIP: Make sure the amount of your offer does end in a hundred figure. If you offer $333,500 instead of $333,000 it sends the message "this really is my maximum".
- Gazumping: The Emotional Stab-in-the-Back
- Gazumping occurs when you are NOT given the chance to increase your offer and the home is sold "behind your back".
- To avoid this pain:
- (1) Accept nothing is definite until the seller signs the contract.
- (2) Write the agent a letter stating your concern about "gazumping".
- (3) Offer the full asking price.
- Gazumping is often done because the buyers have offer too low a price and the seller fells the buyer are being unfair.
- Real estate doesn't always go up, so don't buy into the agent's story that the property will soon boom in value.
- Ask your self the big safety question: What is the worst that can happen to me? If you are not prepared to accept the worst, do not buy.
- Many real estate agents do not give good investment advice.
PART TWO: SELLING A HOME
Chapter Four: How to Choose an Agent
Chapter Five: A Skilled Negotiator
Chapter Six: How to Choose an Agent
Chapter Seven: Method of Sale
Chapter Eight: Presentation
Chapter Nine: Open Inspections
Chapter Ten: Advertising and Marketing
Chapter Eleven: Trouble-Shooting: What to Do
PART THREE: WINNING IN REAL ESTATE
Chapter Twelve: Ethics in Real Estate
- If you want to sell your home and buy another, which comes first? If you sell first you have no-where to live; if you buy first, you may not be able to sell - unless you sell fast and cheap.
- The answer is neither: sell with the condition that you must find another home first, then if you see a home you like, make it a condition of your purchase that you will not buy until you have sold. Personally I still think this would be difficult to do!
- New sales people get three things: a phone, a desk and a month.
- The most basic study of ethics and client care is lacking from the most common real estate courses.
- Golden rule of life: do to others what you want others to do to you.
- Jenman group - protecting ethics and protecting people