How will blockchain change real estate contracts?
Blockchain is gradually taking over the business world by storm. After cryptocurrency success, blockchain is making its way into other industries like healthcare, real estate, finance, gaming, social media, and so on.The unprecedented rise of cryptocurrencies in the last decade has paved a path for various industry verticals. Using the attributes of blockchain like transparency, immutability, and decentralization, those industries are enhancing their financial transactions and operations. And thus, eradicating complexities from the most fundamental day-to-day operations.The innovative concept of blockchain is significantly reaching the masses. It is steadily impacting various areas of life, including the complex real estate landscape.For instance, issues like lack of transparency and data redundancy in the rental agreements’ processes require immediate changes.Considering the daily dealings of real estate companies with contracts, “smart contracts” were need of the hour and indeed, a much-awaited breakthrough.However, interestingly, a computer scientist named Nick Szabo conceived the concept of digital contracts over 20 years ago.Read full story here: Blockchain Based Smart Contracts: A Breakthrough in Real Estate
How can you reinvest your commission in real estate?
If you're already a real estate agent, then I know of no better way to invest than to look into real estate deals. You have the deal flow, time, money, and most importantly industry expertise to evaluate and cherry pick profitable deals. You should place your money into some nice commercial properties that you can manage or co-invest with others. You know as well as anyone how to parlay $200K into a $1M deal and get $40K annual returns. Do that a few times and you're financially independent. In that case, why retire? Just keep doing more deals.
As a real estate professional I need a software other than Adobe to easily fill in text, sign and send contracts. So which?
If you are looking for software that will allow you to complete details in contracts and request signatures from clients (even multiple parties) try FileInvite - File Requests, Document Collection on Autopilot!It’s a great way to manage the flow of documents and access to property files (titles, building inspections, LIM, HOA details etc) .We help thousands of companies and individuals to manage the collection of sensitive documents through our cloud based platform. You can choose to store them on Dropbox, Google Drive, Box, OneDrive or your own preferred storage platform.
Are real estate agents reluctant to help you buy a foreclosed home since they make less commission out of it?
The question includes an incorrect assumption that foreclosed homes (REO's) sell for less money, and therefore result in smaller commissions. Two problems with this logic:Homebuyers usually buy as much home as their banker tells them they can afford. As such if they are approved for a $300,000 home they'll spend $300,000. If foreclosures actually sold at a discount, the buyer would spend the same amount but get a better home - good for home buyer and good for agent (or at least the same).Most people believe REO's sell at a discount because of poor analysis that is continually repeated in the press. One particular foreclosure data provider has pushed the idea that foreclosures sell at big discounts. The problem is that they are comparing the median price of market sales, to the median price of foreclosure sales. That's akin to comparing the average price of used Mercedes to the average price of used Hondas and telling the world that used Honda's can be purchased for a big discount. The banks just aren't foreclosing on higher end homes as fast as low end homes. So a high percentage of foreclosure sales are on low end homes. At the same time a far greater percentage of market sales are high end homes. Even when you do see what appears to be a discount on an REO sale it is usually because the property has deferred maintenance and is in need of repairs. That's an opportunity for sweat equity, but not a discount.If real estate agents occasionally show reluctance to show a foreclosed home, it may be because they know you as a buyer aren't in a position to both come up with a down payment and make the repairs REOs often require. In some instances it may also be because they've had some bad experiences working with lenders and their agents, and a few may even feel its beneath them. Still with as much as 50% of sales being on distressed properties, the vast majority of agents are more than willing to help you buy any home you want, foreclosure or not.
How do real estate contracts work?
Real estate contracts work the same way as any other contracts . . . except, for the contract to be enforceable, it must—must—be in writing.As with any contract, the parties (usually two, but it can be more) signing it must meet some basic criteria. They have to be of legal age. They must be mentally sound. They must be acting of their own free will not under duress, and so on.There needs to be something of value—called “consideration”—to bind the contract. That’s often money, but it can be something else. Particularly in real estate, when property is transferred within a family, that “consideration” is often termed “love and affection.” In other contracts, the amount of money can be very small—such as $10. Many real estate investors use $100 or something close to that. In a traditional property purchase, the “earnest money deposit” (depending on many factors) might be 1%-2% of the purchase price of the property.A contract can be bilateral or unilateral. A bilateral contract requires both parties to take certain actions. A traditional “Purchase and Sale” contract is an example. The buyer promises to pay $x to purchase the property. The seller promises to sell the property for $x.A unilateral contract only imposes a condition on one party. A lease-option is an example. In a lease-option, the buyer has the option (the right, but not the requirement) to purchase. However, the seller is required to sell if the buyer exercises the option.A real estate contract doesn’t have to be notarized (though they sometimes are). Other documents, though, may have to be notarized and conform to other requirements if they’re going to be filed with a city or county.That’s how real estate contracts work.
How much are the real estate commission in USA?
Every state is different, but normally your looking at 3 to 3.5% which is than split among agent and broker. If no broker is involved and you are the broker, you keep the whole commission. Seller negotiates the commission with the selling agent (usually 6–8%). Selling agent negotiates with buyers agents (which is 50% of the 6–8%). Buyers typically don’t pay anything to the agents in this transaction.
How much were real estate commissions in the United States prior to the Multiple Listing Service?
Commissions were always negotiable between the principal and real estate agent, way before the MLS came along.Indeed, back in the day, commissions were often higher as it was quite difficult to complete a sale transaction. With the lower prices and tons of legwork involved, the listing real estate broker would command between 7–10% commissions on a sale. Since the concept of a buyer’s broker wasn't well developed, the listing real estate broker would handle the entire transaction, mostly for the benefit of the seller, who paid the commission fees. The buyers were left to their own devices.This is still very much how it works in commercial real estate.Eventually, residential home buyers sought to get some better advice for themselves to avoid being scammed by the listing real estate brokers. Starting in the 1960s and 1970s, new regulations came along to force additional disclosures to be provided to buyers and new rules of ethics were created to stop all the egregious violations of public trust like steering and blockbusting. No doubt the rising demand for government money for home financing through the major agencies had something to do with that.With the rise of the real estate buyer agents, buyers had more say and confidence in the purchase transaction. Given all the work that the buyer’s agent did, they demanded a commission split from the listing real estate broker. While this split is also negotiable, the rise of the MLS stabilized it at around 50/50 to ensure that buyers were comfortable that their agents were paid enough to work hard on their behalf.The MLS also opened up much more competition to the real estate professional market and that drove down the asking commission rates to about the 6% range. There it stabilized as ever increasing numbers of government regulations about the real estate transaction poured in, all in the guise of trying to protect home buyers from fraud. Well, all those protections had a time and effort cost. You can either be safe or get a cheaper deal, not both. Most choose to be safe.As for your ancillary questions:If there was no MLS and agents didn’t have to share commissions, wouldn’t commissions be cut in half?The MLS is just a marketing tool. Without it, there would still need to be agents involved to put together deals. The only way to save on commissions is to do a deal directly with the listing real estate broker and having the buyer take his chances. Even then, the listing real estate broker is unlikely to welcome the additional litigation risk and would need to bring in another broker to represent the buyer. Hence, commissions wouldn't be cut in half. Now, if the buyer is as competent as a professional real estate broker, then he can negotiate the commission discounts accordingly. There's nothing to prevent that from happening, even now.In some countries (UK) commissions are half what they are in the U.S. and you get highly qualified agents. Why are we forced to pay for two agents and two brokers here?This is simply the free market at work. It's the same as comparing health care costs between the U.K. and the US. Until there's a structural change that reduces the number of regulations and litigation risk, the cost structure today will remain for both. It's simply what the market has determined is necessary to do the job. As it is, abut 80% of new real estate brokers and subagents are out of the business in five years. They just don't make enough to survive. The average income for real estate agents is about $25K, much lower than the median income in the US, around $33.6K.And, nobody is forcing the buyer to pay two agents and two brokers here. That just doesn't happen. Indeed, the buyer DOESN’T pay for any broker or agent. The seller hires a real estate broker to list and market the property, paying the full commission to get the result, whoever is involved. Obviously, during negotiations, the broker’s split may come into play, so regardless of how many people are involved in the transaction, the total commission paid may be reduced.If the coop commission were offered directly to buyers instead of to their brokers, wouldn’t there be more do it yourself home buyers saving lots of money as a result?Maybe and maybe not. Again, a competent buyer who can negotiate toe to toe with the listing agent can always bring the coop commission into the deal as a result. Why doesn't this happen more often? Simply, most buyers are way out of their depths when it comes to negotiations, the ever changing landscape of regulations, and all the legal nuances required to complete a successful transaction. Real estate brokers are constantly playing catchup with whatever new requirements come out from the Federal, state, and local governments, each one a potential new legal land mine. It's hardly something to be risked when you're living in such a litigious country.Bottomline, all the technology changes will have minimal impact on overall real estate commissions. The only way to make a meaningful reduction in the cost of the real estate transaction is to reduce the number of protections in place. Currently, we are headed squarely in the opposite direction, at least until the Orange clown in the White House and the crazy doctor leading HUD gets to work, if ever.