Looking for a home? Have we got a deal for you.
You do all the legwork, look at every home that might possibly be for you, work out your own mortgage, present your own contract, submit your own counteroffer, arrange for your own inspectors, do your own walk-through and make all the follow-up calls.
You do all that, and Homebuyers Discount Realty will give you back up to 50 percent of its share of the commission at closing.
On a $100,000 property, your share might be as much as $1,500, according to Paul McHugh, a principal in the River North company.
The money sounds good, but, you may be asking, ”What do these guys actually do for their share?”
According to McHugh, he and his partner, Jeff Bowles, will help you help yourself.
Homebuyers Discount Realty is the latest wrinkle in the fabric of niche residential real estate. According to McHugh, there are home buyers who need every nickel to buy a home, and they are willing to put in the time and effort needed to get even $1,500 back.
”It`s a lot of money for some people,” he said. ”But these days, having the cash is worth the work.”
Some real estate agents might argue that any home buyer who is stretched to his last nickel is buying too expensive a property.
But McHugh thinks all buyers can use an extra $1,500, whether to help pay the points on their mortgage or to paint their living room.
”This (money) can make a big difference for them in terms of affordability, or it might be nice for someone who has a clear idea of what he or she wants and can use the services efficiently,” McHugh said. ”We think this is the most effective way to serve different kinds of people,” he added. Sharing the burden
This is how Homebuyers Discount Realty works:
The realty company that works with the buyer typically receives about half the commission the seller pays to his listing agent`s company. Typically, the entire commission is about 6 percent, so each realty company gets 3 percent. A Homebuyers Discount Realty buyer will receive half of that company`s share of the commission-1.5 percent-if he or she finds a home without using any more than a limited number of services provided by the firm. (A regular realty firm will usually provide these services and more in an unlimited amount to the buyer without charging a fee.)
The services include assistance in assessing home needs and wants;
analysis of how much money the buyer can borrow and counseling on the mortgage application; a credit report review ($5 per report); limited access to the area multiple listing service (the firm does not have its own listings);
showing of up to four properties; assistance in writing the purchase offer and any counteroffer; and use of home-buying information, which includes flyers and brochures on handling the details of home buying (getting through the closing, hiring an attorney).
Homebuyers Discount subtracts a portion of the buyer`s refund if he or she uses more than the basic service package. Each additional service knocks between 1 and 4 percentage points off the refund.
For example, if you needed the broker to make follow-up calls to your lender to check on the status of your mortgage application, the company would reduce your refund by 1 percent for each call.
If your total refund would be $1,500, each phone call to the lender would cost you $15. If you needed assistance in preparing your counteroffer, it would cost you 4 percent, or $60.
Other add-on services include in-person representation to the seller (6 percent); mortgage counseling (4 percent); contract-writing assistance (4 percent); a financial planning session (4 percent); and presentation of any additional counteroffers required by fax, phone or mail (1 percent).
The big whopper is the showing of four additional properties. That will knock 16 percent off your refund.
Buyers with a vision
McHugh said that his service is best used by people with a clear idea of what they want, who have perhaps already been through the process of buying a house at least once.
”Our goal is to provide good service, and to change the way the brokerage industry works for some people and to give them an option,” McHugh explained.
The concept is similar to that of limited-service realty companies such as Help-U-Sell, which charge sellers either a flat fee or a smaller commission if they share in the work it takes to sell the house.
McHugh said he and Bowles got the idea when they were approached by a couple of acquaintances who were looking for a house.
”At the time we were doing mostly commercial (buildings), rehabs and some new construction. We told them residential wasn`t really up our alley. So we said, `You put in the footwork yourself and you handle it by yourself, and we`ll split the commission with you,` ” McHugh recalled.
McHugh ended up showing the people only a small number of selected properties based on the types of homes they were looking for.
McHugh said his friends liked the service and liked getting the money back at closing. ”One guy paid all his points with it,” he said.
”Our goal is to change the way the industry works,” McHugh said.
Pros with cons
Of course, members of traditional realty agencies tend to be wary of the new approach. Connie Pattermann, broker/owner of Century 21 All Stars in Naperville, says she is concerned this kind of discount service will further complicate closings.
”I don`t know how the lenders will feel about it, especially if the home buyer is going to use the money for his down payment or to pay his points,”
she said.
And, ”closings are already complicated with decorating allowances, rehab allowances, with sellers assisting with points and whatever,” she said. ”I`m not sure what the ramifications will be and how everything would end up to be a smooth closing.”
Another issue is the emotion involved on both sides of a home purchase. Brokers agree that buying and selling a home can be rocky, and emotions tend to escalate rather quickly.
Elaine Waxman, general sales manager and senior vice president of Glencoe-based Kahn Realty, wonders who takes care of the buyer when the sellers back out or the mortgage doesn`t come through.
”One of the most important things we do as brokers is negotiate the transaction,” she said. ”If you don`t have someone in the middle, and if something happens, which it often does, you and the seller will have to face each other directly. That`s when things get emotional. Brokers take the emotion out of buying.
”For your 50 percent of his commission, you are essentially buying access to the MLS. And if you think you can do the job yourself, then it`s reasonable.”
But, she added: ”Would you go to an attorney who would refund half of the fee if you represented yourself in court?”
