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Michele Talks Real Estate Commissions

September 6, 2022 | Posted by: Michele Cummins

Warning! This show is transcripted automatically so there will be spelling mistakes throughout :)

Curtis Pope: 0:21

All right. Saturday morning is time that we check in with the one and only Michele Cummings the local Rockstar realtor we chat with each and every Saturday. Good morning, Michelle. Yeah, whether

Michele Cummins - PREC: 0:32

you like it or not good morning, Curtis.

Curtis Pope: 0:34

Exactly. We got to get you on one way or the other.

Michele Cummins - PREC: 0:37

So happy like, like last weekend of August. Can you believe next week is already September?

Curtis Pope: 0:44

I'm trying not to think about it. Yeah, the long weekend is coming up real fast here. And it's scary, isn't it? Because I mean for you I mean, that means that you know, it doesn't ever slows down the realty season is while year round. But that means certain things like you know, you know, putting the boat away and stuff like that and maybe not going to those, those boat only access places on Harrison.

Michele Cummins - PREC: 1:04

You know what, I've been so busy, we haven't bought the boat out one system or not yet, but you know what, we should just power washed it. And next weekend, we're hoping to take you out on that Harrison river to Harrison Lake and go see you emceeing the bands on the beach, in Harrison hot springs.

Curtis Pope: 1:21

Well, that's an option, too. That's always a good thing to do with the long weekend. I've been doing this for like 11 or 12 years, over many years I've been doing it they keep having me back, which normally events don't hold me back more than maybe twice. So it's amazing. They keep bringing me back

Michele Cummins - PREC: 1:34

here like you just stick.

Curtis Pope: 1:37

Well normally people get annoyed with me after a couple times. So I'm surprised they keep bringing me back.

Michele Cummins - PREC: 1:43

Crazy. You are so hilarious. It last year was fun. It was great. You are so good, bad. And the bands were awesome. And it's just such a good time. So I'm looking forward to it. So that'll be our first voyage of this year, and probably our only one.

Curtis Pope: 1:57

The first and the last. Yep.

Michele Cummins - PREC: 2:00

But yeah, uh, talking about events and things that are happening. I, unlike this Sunday, or tomorrow, out in Agassi, there is a second annual broken whisk car show. And last year was a blast, they had tons of different cars, they're gonna it's from 10am to 2pm. And assume there's breakfast sandwiches, burgers, hotdogs, there's a live band playing called outlaws and lace. And there's full fees and prizes. And the address is right off playing your Avenue. It's at like the restaurant downtown as a city. So that's going to be from tended to tomorrow. And so rain or shine, come on out, bring your vehicle Oh, if you want to vehicle in it, you got to register with FES Mike. So you can contact me if you need that email or contact if you want your car in it. Otherwise, it's coming in July. And okay, so next week and other events Wednesday, August 31, from

30 6: 2:59

30am to 830. There's a special Zoom meeting with local businesses. And the speaker this week is Brandon Kirk. And he's going to speak about the seven steps to a sound financial future. And with inflation going through the roof and the Canadian dollar getting weaker, weaker, we all need to send our money wisely and invest wisely. So this is a free and easy live zoom event you can be part of in your PJs. So just getting your cup of coffee could blink, and come and hear what he has to say. And I'll be there myself bright and early. So yeah, hope to see you there. And you can use the Zoom link. So contact me for the Zoom link if you want to come or watch or be part of that. And interest rates are going up on September 7. So please, if you're going to buy in the next few months, get pre approved beforehand. And that's not just verbal, you want something in writing from a mortgage broker or bank, you need a mortgage commitments in writing before September 7 to protect you from the interest rate hikes because it's probably going to go up possibly 100 basis points, maybe 3.75. But a lot of people are saying probably 100. So that's going to make a huge difference in your buying power, if that affects you. So that's some more information and a stellar seminar. This event is happening September 5. And it's how to sell in today's market. Last week, we're seeing the market isn't shifting, it has shifted and it's it's back. So prepare and know how to sell in today's market for the best seller possible. And so that's September 15, at 7pm. Again, via zoom, and you can contact me for that link as well. And then a reminder, we mentioned it last week, but September 30 is a national day for truth and reconciliation. And that means government jobs have the official day off. So that's not all jobs, but it's government jobs, land titles, land titles is going to be closed that day. So if you're going to close on a property Do not have it be that day. And I would advise not to have it the day before, either because land title closes at 430. And if there's any hiccups or delays, you know, then you're not closing on the property you're supposed to, or if you're betting on that money coming in from the sale, so keep that date in mind. And if you're thinking of buying and selling, make sure, make sure check the date format, and chat with your realtor. So we want to talk about the first segment. Curtis last week, you you mentioned something about

Curtis Pope: 5:34

about commissions. You got it, I made a little one off joke, and you were all over before and so you know what we're gonna talk about that.

Michele Cummins - PREC: 5:42

We're gonna have an episode, we got to how to segment about that as this is that segment. And a lot of people don't know where it is, who pays a commission? How to realtors get paid? And, you know, why do they get paid? Like who's so much are you they see the full dollar, so I'm going to explain it all. So so it's it's right on open, everyone knows. And then the second segment after our break, we are going to talk about pre construction in the age of rising interest rates. If you're thinking you're an investor or thinking pre construction, or you bought a pre construction already, and you're concerned, well, we'll talk about that. So okay, who pays real estate commission. So it's from the transaction. So really, both seller and buyer actually pay for the real estate Commission's but it comes from the purchase funds. So from the transaction on completion date, and only if it turns X typically, right. So the seller is the one with their listing agent who chooses what that commission is going to be. And, you know, there's something called the Competition Act. So there is not a set commission that every one charges, different brokerages charge different rates. And it could be a percentage, or it could be a flat fee, or it could be a mix of both. And it's up to the brokerage you hire and the realtor you hire because they're independent contractors and can choose their own commissions as well. So that's where the commission comes from. Now, what happens with the Commission like is, does the listing agents some people think well, this is I'm signing my listing contract with my my realtor listing my property. And this is going to be let's just say $30,000 of commissions if it closes, and it's not just the listing agent that gets $30,000. So think of a pie, there's four quarters to a pie, one of the quarters is, is the brokerage of the listing agent, as well as the brokers or the buyer's agent. One of the pies is the buyer's agent gets gets part of it. So they typically split in the middle listening, you get half, the buyer's agent gets half, then their brokerages get half of that pretty much. And then the the taxes of the government gets their fair. And then because it's pro bono work, it is like a we don't know, if we're gonna get paid anything, we could pay 1000s of dollars out of our pocket plus, or hundreds of hours of time. But of course, if you have staff than you're paying all your staff, like there's a lot to it before you even know what you're gonna get paid. And a lot of transactions you list. So let's say within 30 days, Completion is about a month and a half, two months later, you're also waiting for your commissions a minimum usually around four months or so typically. But it could be much longer than that. And then if it doesn't transact, if it doesn't close, because let's say the buyer can't, that they didn't get financing last minute or you know, there was something that issue where it didn't transact, the realtors don't get paid at all. So it has to transact. So at the end of the day, what the realtor is actually putting in their pocket their net after their gross their taxes after all those slips. You know, it's not as much as you nearly as much as you would think. So I I'd love to break it down. If anybody has a question. More questions about that. You can ask me but I hope Does that clarify that a bit?

Curtis Pope: 9:08

It's clear as mud.

Michele Cummins - PREC: 9:10

It's clear as mud. Yeah, that's, that's perfect.

Curtis Pope: 9:14

No, I think that does clear it up. I mean, yeah, it's a lot more than just you sell a house and somebody hands you a check.

Michele Cummins - PREC: 9:21

Absolutely. And advertising marketing, professional photos, you know, all of everything that goes into it. You put that too so in that's what happens when you do commission style work right. And you're hoping that closes and when we get back a lot is going to be explained about the what? You know what?

Curtis Pope: 9:47

And, you know, I look back to when you sold our house, you know, almost two years ago, and you had pamphlets made up that were amazing that made our house look so much better than it was you had a drone video done. You did so much work before. Yeah, we he'd ever put pen to paper to sell the house. So yeah, you're gonna have that money before you've ever gotten the commission back.

Michele Cummins - PREC: 10:06

Yeah, exactly. And it's hard to know unless you don't know what you don't know.

Curtis Pope: 10:12

Exactly. All right, well, we should probably take a quick break here. And we'll come back in a bit. But first off, if people want more information about the seminars you were talking about, maybe see the listings you have, there must be some place they can go to get all that information,

Michele Cummins - PREC: 10:26

or is And as Michelle We're back

Curtis Pope: 10:29

with more right after this. And we are back it's time for segment number two of the Cummins Real Estate Group show with Michelle Cummins and myself Curtis Pope. Now, Michelle, we talked about the various things in the first segment and and how commissions work and things like that, and what are we talking about in the second segment?

Michele Cummins - PREC: 11:29

Okay, so we're talking about pre construction in the age of rising interest rates. So I have a few pre sales, I've got course clients that have pre sales, and there's some stories recently of some transactions that has been around pre sales and certain prices that were accepted and, and firm and concrete, supposedly, but ended up being a little bit more flexible than the developer and the buyer thought. So anyways, that sounds interesting, doesn't it here, like what is going on? And what does that mean? So let me dive into that. So markets cross our countries, they have begun to cool from last year's highs, it literally was at the highest in February, and the world of pre construction is facing its own share of new changes. As interest rates rise and developers and buyers reassess their plans, it is becoming increasingly difficult to navigate the space for successful investing, though there's still lots of potential for those who know where to look. So to help shine a light on the changing environment in the pre construction world, we wanted to talk about what seems in pre construction specifically. Now the first major factor that began to affect the pre construction market earlier this year was the changes introduced in 2022. Federal budget changes to the way assignments are taxed, as well as limits on foreign buyers playing a role in cooling demand for pre construction homes, particularly from investors. The biggest disrupter, though, as is common across so many markets, today's rising interest rates, September 7, is looming. Higher interest rates increase the carrying costs and mortgages is driving home prices lower and cause buyers to reevaluate their pre construction purchasing decisions. This is especially true for those investing with money borrowed from their home equity. Line of credit. Right now the Bank of Canada is increasing rates to fight inflation. But the problem is when we use interest rates is cool the housing market and prices fall, this is an issue for those selling properties that are subject to probate as well. So let me explain that a bit more because it's, I have a true example that recently just happened. Buyer waiting to list their property to three months laters three months too late. So what happened was a listing that is subject to probate and I'm doing another one now, but probate can go for six, eight months, it can go a while. So when you still subject to probate, you sent a price let's say it was at the height of the market in February, and the buyer chooses to wait to list their house for three or four months or until they hear probate is you know, coming up soon enough. Well, in a falling market like we've been in their home price has fallen as well. And their their pre approval of their mortgage had expired. So everything had to be redone. The appraisal came back much lower, their pre approval came back much lower. And they're selling the house having a hard time selling the house not being able to sell their house and listed a lot lower than they thought. So what does that what does that mean? They can't close on the property. That $100,000 deposit that they put in the sellers are good Only to be able to keep it and now those buyers are possibly facing maybe legal action to because the seller could sue a buyer for not completing on the legal contract that they were supposed to complete on. So you don't want to be in that situation. So pre sales and subject to probate sales are the ones to really be careful with and to watch out for. So that is a story on that. And then you know, if you're tied to purchasing this pre construction property, depending on an end, you're depending on your equity line of credit from your current property mortgage, but it comes time to close on it and your bank does their appraisal near when you're going to complete but it might not complete until 2023 or 2024. And and so you're now you can't get as much equity out of your property to the line of credit, as you saw, and now you might not have the money to actually close on it. So selling a few, you might have to sell for a few $100,000 More than you had planned. But you already committed to purchasing that pre construction property to so let's say you were going to sell your property but closer to when you were going to complete. And now you're selling like I said a few $100,000 less. So that that's the major changes. And I the situation, I have a situation another one right now where my buyers are wanting to purchase a property and the seller wants to sell but they have to have a certain amount, but their property is not selling for that certain amount, and they're not going to be able to sell it for that certain amount. So they had to go with their realtor Lucky them. They use a realtor to buy their pre construction. So their realtor went and renegotiated the price with that developer saying listen, they're not going to be able to close on it, and they're not gonna be able to sell unless you work with us here on price. So please, can you come down on 100,000 from the purchase price and the developer actually said that. So they are also seeing the times and knowing and understanding what's happening, they won't do their deals to close as well. They don't want to issues like people not completing. So if you are stuck in a situation where you're having a hard time you talk to your realtor who you bought that pre construction with and see what they can do for you with the relationship they can negotiate with the developer, hopefully for your benefit. So So what So new developments can take years to complete, and developers must price projects based on their best projections. And the issue now is that many developers are finding that costs are exceeding their expectations and buyers are dropping off, which can severely disrupt their plan. And while homeowners can usually lower their prices in the event of a market downturn, developers don't have the same luxury putting them in a tough place. There are a few other ways developers can deal with this situation. Some projects may simply still have enough demand to move forward, others may stall while they attempt to find more buyers and raise more funds. So a third portion may need to be cancelled altogether though lien investors who had possibly put deposits in and bought these preconstruction some units with with nothing to show for their time and their money. So I again, example, I had a couple pre constructions in a project in Abbotsford. And they just decided not to see the progress anymore. So you know, they did send back the deposits. But But here, I'm out to amazing, wonderful units that I could have had. So so that can happen as well. So how to navigate a changing market. So this doesn't mean that preconception is out of the question for investors or purchases, opportunities still remains the key is simply that confessors choose to pursue and where they have to understand that where are they buying? And what are the big deals, what still works in our changing times and investing with reputable developers make sure you know who the developers is that can help investors to come out positive on the other side. I think investors at this point in time depends on the product they're looking at. So like condos, anything more than a mid rise, maybe I'd be a little hesitant about that. Because we don't know where that marketplace is going right now, smaller scale projects will tend to do a little better in these type of markets, because the builder is not going to be as dependent on on investors. But you know, you just don't know you really have to do your due diligence before you put a 10 or 15 or 20% deposit down on a pre construction nowadays. So the shifting market also gives buyers much more leeway in negotiating as I explained earlier with developers. So though developers may not be able to lower their prices outright, there are many allowances that can be made at the negotiating table. So in this case, it's ideal to work with agents who have good relationships with developers. Despite the current turbulence, there is a light at the end of the tunnel, especially in the area of Our Greater Vancouver and Fraser Valley. You're investing into one of the largest growing areas of the country, and those things may be down for the foreseeable future. Thanks likely turn around and see demand and values rise again, as everyone is saying, the history of the market at least would bear out this truth based on previous lumps, it has happened, I've been to, I believe four of them. Now since I've been licensed Realtor selling for the last 19 or so years, I think long term, there's obviously going to be a rebound. So pre construction is going to continue, we're just going to see a bit of a slowdown as we did in 2012. And 2014 2017. builders will just make the decision to put stuff either on the back burner or just not proceed with it to come out unscathed. You got to work with the time. So that is about that any more information or questions you have on pre construction, please always get a hold of me. I'm happy to answer all your questions. And then I wanted to go into my three new listings. So I have a lot in rivers reach that is in Harrison Mills on Harrison River, and it's 450,000. And it comes with House plans that are already approved. So they're already pre health plans, you get those for free, use it if you want to. Or you can actually purchase that lot with that house built for you. And you can customize it with the seller who is a builder. So that is a great listing coming up actually. Not on the MLS yet. It'll be next week. Now I got also a co listing on the Cray and that open house is today and tomorrow. So you want to if you want to go out and have a look at it. It's really interesting in the heart of Michigan, and it's 1.72 acres backing on to a theme. So trees ravine and potential subdivided is already has a second service lot. Fenced private. The house has five bedrooms, three bathrooms does not have to move the house to build another one. But again, you'd have to check with the city potential of that because it's filled right off McCreight in Michigan, it's a 3200 square foot house easily cleanable completely above ground. Beautiful two storey so there's that one for 1,349,000. And then I have a place on green place and it's on a 4100 square foot lot. This one's also back down to Parkland green space on two sides of it actually the back end, the west side. And it's a six bedroom three bathrooms, basement entry, beautiful building 2011. The price is 1,100,000 is a complete, beautiful suite it would make you just have to put a $15,000 kitchen in and out of suite in that place as well. So those are the new listings. And I got the quote of the week. It's when everything seems to be going against you remember that the airplane takes off against the wind, not with it. That's Henry Ford.

Curtis Pope: 22:49

Okay, so a plane flight. Okay, I had to think about that one.

Michele Cummins - PREC: 22:53

When the plane takes off against the they don't take off against the wind or not with it.

Curtis Pope: 22:58

Yes, I follow. Yeah. Okay. I don't have my pilot's license. So I'm, you know, but I had to think it through and you're right.

Michele Cummins - PREC: 23:06

Do that a third time? Oh, it's one of those times.

Curtis Pope: 23:11

That's right. Well, if people want more information from you, maybe they want to hear these quotes again, or they want to have a look at your listings or things like that. Where can they go? Michelle, come and stop together. And join us again next week when we will talk real estate in order to unlock your real estate potential on the show where real estate is maximized. Thanks for listening

If you missed last week's episode where Michele and Curtis talk about the new building regulations in Victoria BC, please go take a listen! It's well worth it!

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