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Commission is paid for real estate transactions. Many people don’t understand how commissions are paid. They are bothered only about the cost of the commission. In this article, Dc Fawcett a real estate investor and educator, reviews how real estate commission works and makes you comprehend commissions.
Dc Fawcett Reviews – What is a real estate commission?
A real estate commission is a fees paid to the real estate agent.
How much is it and who pays it?
A real estate agent’s commission is something which has to be paid by the broker. An agent works for the broker and the fees is paid by him. The broker makes a purchase agreement with the seller who then pays the broker along with the agent’s commission.
A real estate agent’s fee is a percentage of the selling price and can be decided only when a selling transaction takes place. Now, who pays the broker’s fee? Is it the buyer or is it the seller? Well it is the seller who pays the broker’s fee.
Compensation for the real estate agent
A real estate agent is compensated anywhere between30% to 40% of the fees that the broker receives. Top class agents receive 100%
Dc Fawcett Reviews – How is the money divided between the seller’s and the buyer’s agents?
Money for the seller’s and the buyer’s agents are decided according to a fixed agreement. Usually the percentage is equally divided. But in some cases one can get more than the other. In that case, the lawyer will do the needful. As stated before in this article, the broker pays the agent. The rest of the real estate fees are divided for marketing, office space and rentals.
Does the agent deliver as much as the fees?
When the home gets listed and then gets marketed very quickly, then the seller’s agent does not have much work. He gets commission for listing, fixing up the price and so on. This is just the basic work and he has not put in so much of efforts. The home has sold rapidly, luckily for him. But, he gets the commission as signed in the contract. On the other hand, say, a home does not get sold for a long time, even a year. Then the agent has to conduct many open houses, speak with so many buyers, keep abreast of market developments and effectively update marketing strategies. Also he has to bear the cost for advertising, signage and so on. In this case also, the agent receives the fixed commission only. So, this argument has a neutral side and you cannot decide on this.
Listing price commission
The listing price is the selling price. When the listing agreement is signed between the broker and the seller, the broker gets complete authority to market the home. When he does this, the agent of the broker brings a buyer for the seller. If the home sells, the broker gets a percentage of the list price as the commission. This is shared with the agent.
DC Fawcett Reviews – Choosing Real Estate Investment Is A Lucrative Option .why?
There was the housing bubble a couple of years back. As a result, many of the investors lost their investment money. Many felt that real estate is some scary prospect and hesitated to put money into the real estate. As luck would have it, there were low prices and surprisingly lower interest rates. So, going by the saying ‘Make hay while the Sun shines’, this is the suitable time to put investment in the real estate. DC Fawcett says It is not the only criterion to be considered, but economy has had a boost. This means that the price amounts and interest rates have already started to go for a steep hike. And there is nothing to stop the growing trend.
Why investment in the Real Estate is the best option:
The financial crisis that happened of late created many chances for those who have affordability to invest in the real estate. The large amount of foreclosures that occurred recently created a larger amount of pool for the renters. This means that rental properties are the best viable investment. It should be easier to get people to rent the property. This is due to the fact that many people are getting jobs, and disposing properties for a huge profit should become more viable.
Mortgage rates plummeting down
The rates of mortgages are at an astonishingly low price and this means that putting investment in properties would yield a huge return. But still, rates have started to make a slow hike. So, the condition is not in the favor for a longer time. One should also consider the fact that real estate prices are presently plummeting down. One has plenty of scope to invest in the present market if one does not wait for long.
Investing in short sales – making best use of it
Making investment in the short sales is also a viable chance at the juncture. It is due to the fact that many people choose this over foreclosure. Going for the purchase of short sales is a better opportunity than purchasing a property that has been foreclosed. This is because there are huge possibilities for the property to be destroyed since it had been foreclosed.
Dc Fawcett Review – Real estate investment – The choicest one
Anything might happen in the future, but investment in real estate is the choicest investment in the longer run. The present real estate costs are more than the prices that existed thirty years ago, and acquiring residents makes the investment more profitable.
The fate of Investment Property Mortgage Rates:
Of late, the prediction is that the mortgage rates will have a steep hike in the next few years. But it will not be every prominent. As a matter of fact, even a small percent of hike in interest rates will cost huge amount of money for the investor. This increase will happen slowly in course of time, and would not take any individual unawares.
The financial growth is happening not rapidly, and this means that rates of mortgages will not have a steep hike. The only thing which would prevent the economic growth and increase in rates would be some war or fresh economic crunch in Europe. Presently, the job scenario is also growing, and this in turn means that many people will be shifting residence and they will look for new residences or rentals. This caters to the needs of the investors.
Earning well as mortgage rates do not rise suddenly
Through the lower mortgage rates, the investors have plenty of alternatives to making profit. The good news is that hike in mortgage rates happens slowly. This means that real estate investors can make a huge amount of money in the near future. As a matter of fact, the rates are increasing, and at the same time many people are looking for a residence or a rental.
The increase in profits may not be as high as the increase in rates, but the number of chances to have a huge profit will be huge in the future.
Dc fawcett – Why is it so hard for some people to make money in real estate business?
Real estate is an asset which is immovable. It is not as simple as selling the products that are sold in the market or otherwise. It requires a lot of efforts to make a sale. DC Fawcett says the difference between selling a real estate and other projects is the paperwork and the legal formalities involved in it. However, make money in real estate business is within your reach, provided you put efforts.
Reason for Real Estate Failure – DC Fawcett Real Estate Tips
Making money in real estate isn’t impossible. There are lots of success stories in this field. You need to use right strategies to succeed in this business. More than anything else, you need to be committed and have a solid business plan to succeed in this field. Here are the reasons why some people find difficult to make money in real estate business.
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Attitude
It is the most important thing which can either make you or break you. If you decide to enter into this business out of your impulsiveness such as trying out, it means the lack of commitment from your side. Though many have succeeded in this field, you need to analyze how many years they have spent and the efforts they have put to come to the top level. People focus more on results than the efforts it takes to achieve them.
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Little or no savings
Financial stability is needed to start the real estate business. If you are lacking in it, you will find this journey very tough. It takes some time to build up relationships, create context, show context, and go through the transaction process.
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Overpricing
Fixing a price for the property depend on what type of property you own. You cannot assume that pricing will be the same for all of them though you can fool many customers into buying them but in the long run, it does not pay.
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Lack of rapport building
This is the basic foundation to sell the properties at the price you need. It takes some time to build up this strategy of communicating with the buyers. You need to ask the questions to keep the conversation going to which the answer from the buyers should be “yes.” The important thing is after asking these questions, you should keep quiet and allow the customers to speak.
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No buyers
The common mistake which most of them make is finding the property before finding the buyer which should be the other way round. They simply throw the signs, hoping that deal will be closed if the buyer comes although it may happen. However, in most cases, it does not happen. You need to speak to the investors beforehand, which help you to narrow your search.
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Lack of persistence
People quit if they don’t get success right away at the initial stages. This is the most common thing which should be avoided. Instead of that, you need to stick with a program that gives you a proper guidance.
Dc Fawcett Reviews – To Find Best Investment Rating In Real Estate
Real estate investment is one of the best ways to make money. However, it has always been a challenge to find the genuine real estate company. The real estate investment rating measures the property’s risk-adjusted returns, compared to a risk-free property asset. A real estate rating is an important factor which can be used as a reference to decide about investing in a particular real estate company. DC Fawcett provides the tips to the investors to find the best investment rating in real estate.
Dc Fawcett – How to find the best investment rating in real estate?
Though it has been a challenge to find the best investment rating in real estate, it is not impossible to find. When you think about investing in a real estate company, there will be certain hints which cannot be overlooked. You need to see how many stars it has got and read the reviews that the investors had given. Every company gets positive and negative feedback from the investors, depending on the services they got from those companies. The real estate companies may have a rating based on the number of stars they have. The star ratings are from 1 to 7 with 7 being the highest and 1 being the least. 1 star indicates poor service and 7 stars indicate best service. Here are the critical factors which help you to find the best investment rating in real estate.
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Project Developer Quality :
It assesses the developer’s track records in estimating the stipulated timelines in the project they are currently handling. It determines the developer’s capacity to complete the project in a given organizational setup and the financial budget to fund the project till it is completed successfully.
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Project Construction Quality :
It consists of the creative and innovative concepts that are to be used while constructing the building. Green building, amenities, recreational facilities, etc. are the examples of creativity that are used as a constructing a building. The factors involved in this concept are contractors track records, the developers have deployed, the technology used for construction, easy availability of raw materials and labor, which might lead to time overruns.
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Project Legal Quality :
It refers to clear legal title to the land, government approval status, that includes a 7/12 extract required for the project, which includes land usage, clear environment, clearance certificate etc. for further proceedings. It also covers the sale deed evaluation to make sure that transactions are clear and transparent.
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Project Financial Quality :
It mainly refers to project funding status, mix funding and the financial flexibility of the project.
Advantages
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Investors
- Investors can locate the best places to invest.
- They can identify the property that is most beneficial to them.
- The investors can provide objective criteria and the price range that fits their budget.
- Can calculate the right and expected rent income.
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Sellers and Agents
- Are able to calculate the best price for quick sale.
- Helps them to expand their property to national buyers’ pool.
- Differentiate property values.
- Build confidence in transaction value.
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Lenders
- Can determine the collateral value of present and future.
- Evaluate possible loss during foreclosure.
- Decision to foreclose or loan modification becomes easy.
DC Fawcett – Making a profit via sale of investment property
Property is by no means a trivial investment. Every step you consider pertaining to your portfolio should adhere to the comprehensive goal of the portfolio. If you mission is to gain money, selling off an investment property is reasonable.
Dc Fawcett says ,Selling off your investment property is not as easy as selling a stock. When you are in the process of selling your own home it can be daunting when you are not aware of where to commence. In fact selling off an investment property is also par to the process of selling off your home. The capital issues as well as the tax implications add more difficulties to the sale.
Investment Property
Now let’s see some of the factors that are important so that you can make a profit out of your sale of investment property:
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You will first list your property for sale. Here then, confirm whether you have looked up all the possibilities so that it makes a good sale. You may be having different reasons to part off you with property but be cognizant of the tax concerns which will eventually burn some extent of your income.
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Real estate investors are those who are mainly interested in investment properties as far as promotion concerned. But this doesn’t mean that the other types of purchasers are not interested in your property. Your property might have given use to you to give you a stable profit. This would have been done through rent. But again there are different types of purchasers too who would be the target of the deal.
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A real estate agent comes to the aid of you and will help you in expanding the options as far as promoting your house for sale is concerned. By this you have keen interest in the property and get in a substantial deal.
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When you possess investment property, capital gains is one of the many major benefits. What is its main benefit? These gains are taxed at a lesser rate and there are no fixed limitations on the frequency of utilizing these rates. At the time of selling your investment property you will have the responsibility to pay a capital gain tax. You would be paying a tax when your primary property is being sold off. The capital gains tax is in fact more than this tax.
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You can avoid expending money on capital gains on the income generated from the sale of your investment. This is done by using the escrow which is utilized straightaway to buy another investment property. There is a section IRS 1031 which gives the benefit of this tax deferral.
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For instance you have taken the help of property managers to assist you in dealing with your portfolio of income-generating properties. Here then you can use incorporation to get the benefit of more advantageous tax rules. But again if the investment property falls under your corporation your means of monthly income will not be simple.
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While selling off your investment property if you do it at the right time and with appropriate methods, you would surely get a substantial profit.
Dc Fawcett Real Estate – How To Calculate Capitalization Rate For Real Estate
DC Fawcett Virtual Real Estate investing club
Real estate investors should have a method to derive the property value they’re going to buy. This is required as many times; a person ends up paying more than the expected price which reduces the profit when they are selling the property. The Capitalization rate is determined on the basis of the income from other properties and the recent selling price.
DC Fawcett has advised the investors to use this formula to get the exact value.
What is Capitalization?
It is the rate of return on real estate investment property based on the income you expect the property to generate. In other words, the capitalization rate is used for determining the investor’s potential income on their investment. DC Fawcett Virtual Real Estate Investing Club.
Capitalization Rate Calculation
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You can derive the capitalization rate by dividing the net operating income on the investment by the property’s current market value. Here is the formula:
Capitalization rate=Net Operating Income/Current market value.
For example, if the recent selling price of a property is $4, 00,000 and the net operating income is $20,000, the capitalization rate has to be calculated.
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Divide the NOI by selling price to get the capitalization rate, i.e. $20,000/4, 00,000 = 0.05 or 5%. All that you need is a calculator.
Dc Fawcett Reviews – Selling the property
You should know what price to fix for selling the property taking all the expenses and the cost price into consideration. For instance, you own a small apartment or the plot and want to sell it. However, you do not have the idea of what rate the property has to be sold. For this, you need to check the current rate for the property similar to yours. Though you find the property sold three or four months back, the catch is about the net operating income which is sometimes published in the listing. If you get three property cap rates on an average of 9% and your net operating income is $36,000, the NOI cap rate is:
$36,000/0.09 = $4, 00,000 which is your property value.
The decision is entirely yours whether to ask for the price for the property or take it from the market.
Buying the property
When we buy the property, we are on the other side of the transaction. If you target to buy a small apartment, you should check whether the price quoted for the apartment is worth or not and whether you are being overpriced. If the price is $5, 00,000 and the capitalization rate is 10%, here is the calculation.
$5, 00,000 x 0.1 = $50,000, which is the required net operating income.
The capitalization rate is useful as it helps you to get the information about the investment, so interpretation becomes easy and you get the fair idea when you decide to buy or sell the property. The capitalization also helps you to know what amount you are earning on the property.
Conclusion
These are some of the basic points on how the real estate commission works as reviewed by Dc Fawcett.
