The Flat Fee vs. Commission Debate: What It Really Costs You With Fred Glick Of Arrivva

Drew Thomas Hendricks00:00:19

We are on We Fixed Real Estate with Fred Glick, and we are talking about commissions discounts in a recent article from Selling Later. That we are responding to. Fred, talk to me about this. This is pretty interesting.

Fred Glick00:00:33

First of all, if you are a buyer or seller and you haven’t gone to sellinglater.com, go there.

It is 100% consumer information. It is not any real estate agents, not any real estate company sponsored it. It is a nonprofit, and they are fantastic and they’re diligent about helping consumers. And going all the way from the FTC, the CFPB. Woman who runs it, Wendy’s fabulous. And she’s just calling out the bad guys and the things you shouldn’t do.

So she wrote an article, there’s this group that she’s involved with and I can’t remember what it is, but they came up with some ideas about commissions. And one of the fun things was that how could you possibly have a discounted commission when there is no guideline for what commissions are supposed to be? Because they’re all negotiable.

I love it when agents say, “Arriva is a discount broker. You don’t want to use a discount broker.” And I say to them, no, we’re charging a reasonable flat fee. You are the overchargers. It’s a big difference. And I love, you know, when they say, “Oh, you know, you get what you pay for.”

Well, not in this case, not where it comes to real estate representation, where you’re telling me a brand new agent is supposed to get 2.5% of a sale price. And they don’t even know what they’re doing, but you’re gonna pay that same two and a half percent to an agent that’s been doing 30 years. I mean, it’s just no rhyme or reason. It absolutely makes no sense to call anybody a discounter. Now, there are companies that do limited service. They only do a certain things and they charge a lower fee for doing it. I don’t call that discount, they’re just, that’s what they’re charging for that specific service. You get a lawyer who just does the contract and nothing else, pay them a fee.

So we are, I mean, I’m always answering this question, “What’s the difference between you and other real estate agents?” I said, first of all, let’s start out with the fact that we’re in Slack. If you ask 98% of the real estate brokers, they won’t even know what Slack is, and they don’t understand the communication software.

They don’t evolve into these things. They worry about going to seminars to figure how they can talk to you, to be able to manipulate you, to go hire on a contract, as opposed to how to communicate with you and take care of you and worry about you, and work for you. I mean, I’m rambling here.

Drew Thomas Hendricks00:03:13

Yeah, well, like, such as her, like those common sales tactics where if you ask someone, “Can you discount it?”

And they’ve been trained to say, “Well, discounting commissions is not something I can do. Can I tell you why? Because I don’t deliver discount results, and I’m sure you don’t wanna discount your house. Right?”

Fred Glick00:03:29

The other one is, “The fact that you’re asking me for a discount and I’m not giving you a discount, shows you what a great negotiator I am.”

Drew Thomas Hendricks00:03:37

And here’s the crux. I mean, what, there’s a fiduciary responsibility to loyalty care, full disclosure, and printing interest first. It’s not a premium unlock by paying more. It’s the law.

Fred Glick00:03:47

Exactly. Exactly.

Doing the right thing. It’s what you’re supposed to be doing. It’s like a diamond. If you go into Tiffany, oh my God. You get the whole experience. The beautiful countertops and the dressed-up people and the, you know, Fifth Avenue location and you like paying more there cause you feel this luxury or something, you know? So you pay $10,000 for a ring. You know, when you go to Louis swap shop, who just got the same ring in, you’re gonna get it for, you know, 30% of the price. It’s the same ring in the end, you know, but there’s also somebody who is, let’s say, a broker of diamonds who goes out and looks for you and finds it. And there’s different suppliers and they find it for you and you pay half the price that you what at Tiffany’s. So, you know, don’t be swayed by, I love that, “Oh, we have 22 million agents around the world.” What’s that got to do with anything? Properties, when you list them, they go up on the MLS, they go up on Zillow and Redfin, and realtor.com and all these other websites, and that’s how people find it. It’s like, yeah.

Here’s another thing I don’t understand. Why do you have open house signs out on a highway directing people to your open house that you don’t even know who they are, what they are? It’s insane. I’d rather have an open house of three or four different sets of people who are serious about the property, rather than 50 that just show up.

“Oh, we saw a sign, we thought we’d look at real estate.”

And the first question out of the agents mouth, “Do you have a buyer broker? They don’t even know if they’re qualified. I mean, that’s what an open house is for, is for them to find buyers. And they’re not paying you anything for that.

They should be paying you ’cause it’s like putting an ad on Google.

Drew Thomas Hendricks00:05:36

I thought the open houses were for the curious neighbors that wanna see what the inside of that house looks like.

Fred Glick00:05:40

Oh, that too. And you know, there’s a theory that, you know, the first day you have a special open house just for the neighbors, the nosy neighbor, open house, eh, it’s cute, whatever, get ’em over with.

But you know, if they really wanna, I don’t do that. Just come. And then after it’s closed, we could say, look, we listed it in for 12 days. We got 103% of asking price. You know, nothing, we didn’t lower it to, you know, and get 400% over. ‘Cause we made up a number and then you send it out to the neighbors, you know? Joe and Mary are gonna miss you. They’ve moved on, but we have new neighbors coming in, and here’s how we’re able to do it.

And here’s our, and what they never put on anything is what it costs the sellers to sell the property. You know? And we show a beautiful property. We showed it sold quick, and by the way, you don’t, you didn’t have to pay two and a half percent to do this. So there you go. We gotta work on those postcards too, by the way. Just sold. Just sold and saved.

Drew Thomas Hendricks00:06:50

Just sold. Seller saved X amount. And that’s the key. You gotta ask these questions, and I think a lot of people are afraid when they’re interviewing agents to ask some of these questions.

Then they get that initial pushback going back to the, you know, the agent says you get what you paid for. That’s really just code for don’t ask too many questions.

Fred Glick00:07:09

Yeah, exactly. “We charge a lot of money, so you know you’re getting the best service.” No, dude. Seriously.

Drew Thomas Hendricks00:07:16

What are some questions that you know you’re interviewing, and most people, I mean, there’s the comparison that most people spend more time researching a shampoo bottle than they do researching their real estate agent.

Fred Glick00:07:27

Okay. So on the seller side, you know, “Hi, I am Susie, and we’re gonna do this beautiful presentation, and we’re gonna stage your house and we’re gonna put it on the MLS and we’re gonna take pictures.” Okay? Well, talk to me about your negotiating skills. How are you gonna get me a higher price? How do you work with other agents? Do you have an automated system for disclosures and inspections? Do you know how to fill out the contract properly? Who’s writing the contract? You? Do you know how to read the contract? Do you know what the pre-approval really is? Can you tell if it’s a fully underwritten pre-approval? Do you know if they’re just giving you a DU? What that is? Did you check the proof of funds to make sure they actually count, add up to what the down payment is? So you have an automated system for all the offers, so it makes it easier so everybody uploads ’em to one place.

Are you using for your inspections, just the guy that you know, that you use for every inspection ’cause he’s your buddy? Or are you independently rolling and negotiating and getting other people to do it, and trying to improve on the job? Who pays for what? Is another question.

And obviously, what are my total expenses besides the commission? Do you charge any other fees? You know, as soon as they say, “We have an admin fee,” tell them no. No to the admin fee, they’re gonna ask you for two and a half percent commission, and then, and then say, “Hey, well we gotta pay this staff and commission.” Yeah, it’s not an extra, why should it be an extra fee to me? So yeah, it’s a paper processing fee. All right. So there are a few ideas of some things you can ask them.

Are you using the open house to find buyers? You know, so they’re not expecting you to say that, and they’re gonna ham and ham and ham. “Well, it happens that sometimes, you know, we form relationships with people,” and blah, blah, blah. You know, are you a talker? I love that one. “Oh, I’m a real people person. I love to talk.” Well, that’s probably bad for you as a seller. You wanna just sit there and listen and suck up everything about the clients and ask the clients leading questions like, “Do you work around here? Or, “What brings you to this neighborhood?”

You know, as a buyer, you don’t wanna answer these questions because, like, I’ll give you an example. We had two doctors that came into an open house, said, “Oh, we love this place and it’s great. It’s only two blocks away from the hospital where we both work, and we work crazy shifts.” Guess what? They paid more because,

Drew Thomas Hendricks00:10:17

Oh. ‘Cause they knew.

Fred Glick00:10:18

The listing agent found that out. Because the buyer, and so, you know. There’s ways of getting information out. How quick are you responding to your, on your phone, your texts, your emails? Do you wait till at night to return all your emails? Which we find interesting with some agents. They don’t, I don’t know what they do all day, but no paperwork gets done till the night. You know? What kind of phone do you have? Really?

Drew Thomas Hendricks00:10:46

It’s true.

Fred Glick00:10:47

Got a 7-year-old Android, you know, and, oh, I don’t like the phone. Anyway.  Little things like that.

Drew Thomas Hendricks00:10:54

No, that’s true. Especially, if you’re on a group chat and everyone else has iPhones and you’re the one guy with an Android.

Fred Glick00:11:01

The green man. Yeah.

Drew Thomas Hendricks00:11:03

You can’t communicate on the messaging app on the computer. There’s always one person that has an Android that makes it impossible to do a group chat.

Fred Glick00:11:12

Yeah, exactly. Oh, well.

Drew Thomas Hendricks00:11:15

We’re in the details there. Well, on the buyer side, so buyer comes to you, I mean, it seems like a lot of buyer referrals, but what’s some of those questions if a, for if you’re looking to buy a home in an agent that you would wanna…

Fred Glick00:11:29

All right, let’s start with the fees again. Obviously, you wanna know, other than your  commission, how much your commission, other than that, you know, are there any other fees? Why do you charge me that amount? Because what happens is you go to a big company and they say, our minimum commission is 2.5%. You can’t take any less. You know, maybe you go to the manager and beg or 2% or somebody on a big deal, but when you say why and, and listen to them. Let them hear. What’s your availability like? Just leave it that, leave that open-ended. Well, I have, you know, that’ll flush out any part-timers.

So, or I work with a team. Or tell me about your experience with what I need for mortgage approval. Half of them, most of them go, “Oh, just go to my guy.” Not, no, you and we, I tell this to every buyer, especially you know, in the markets that, it doesn’t really matter what kind of market. Get yourself a fully underwritten mortgage pre-approval. I’m gonna go crazy saying this 5,000 times. ‘Cause it, you get it over with and you make sure there’s no problems.

So even if you’re on a non-competitive property, you can go in and waive the mortgage. You can get a better price. ‘Cause look, I’m done. You don’t have to worry about it. So, we’re not taking the house off the market for 15 days to get a mortgage approval. So now we want a better price because of that. So these are important things.

Explain to them about the inspections. What are the important things to look at when you get an inspection package? I volunteered my favorite prompt for AI with a disclosure package, which you, you’ll have to talk to me to get that. I’m not giving that one away. Yeah, it’s just general knowledge.

Drew Thomas Hendricks00:13:39

You mentioned one in a, one, a couple episodes back that it’s sometimes savvy to ask to look at a previous contract they’ve written up to make sure they actually write up a contract.

Fred Glick00:13:50

Yes. Ask them for that contract. Take, just say, “Take the names off. I wanna see a contract you’ve written.” And then see if there’s mistakes.

See if things that don’t make sense, throw it in ai. You know, ’cause I’ve actually had agents who are like 25 years experience writing these contracts. It makes no sense. They miss half the stuff. Terrible.

These are people writing contracts for you. Binding contracts.

Drew Thomas Hendricks00:14:17

It may be legally binding, but you can definitely upload the document to ChatGPT or Claude or Gemini or whatever, and tell ’em you’re an expert in analyzing real estate contracts. “Tell me in California,” be as specific as possible and just point out anything that may be lacking or, and point out the good stuff too. And it’s a good way to get yourself, a little bit of knowledge about who you’re about to be working with.

Fred Glick00:14:46

Exactly, and if you see they miss things or you know, just put the wrong things in there, run.

Drew Thomas Hendricks00:14:56

Yeah, well, changing the topic a little bit. Two weeks ago, if you haven’t listened to it, you need to go listen to it. We had someone on the show, Jubilee Homes, doing about land leases, and so we were just talking about leases in general on the pre-show. We thought it’d be a good idea to, to kind of do a little bit of a rundown on the lease-to-own, which isn’t a land lease. It’s really just like a rent to own lease to own. Let’s talk about that.

Fred Glick00:15:19

Yeah. Let’s call it rent to loan, because a leasehold property that we talked about is, is definitely when it comes to a sale and it’s breaking down the land and the real estate. Rent to own, everybody loves, “Hi. Find me a rent-to-own.”

First of all, there’s like no website that just has rent-to-owns. Okay? So you could go through every lease property in your area on Zillow or wherever. You literally have to make a phone call on every single one of ’em. Would you consider rent-to-own? So let’s take an example, really easy example. So there’s a property and it’s worth 500,000.

You come in and say, “Look, I don’t have any cash. I got this under-the-table job,” or something where you can’t verify income or assets. You can’t get a mortgage right now, but you’re starting a job in a couple of months. You’re gonna have a history in a year. Say, “Look, I’d like to rent this say for 18 months,” but you want an option to be able to purchase the property at an agreed-upon price at a certain period of time.

So if your rent is 500 a month, people have this idea that you can just take all the $500 a month payments and apply that to the $500,000 sale price as part of your down payment. And that’s how you kind of get these rent-to-own deals. But it’s not.

Let me take one step back. If you have the income but don’t have the assets. Check with a local mortgage banker or broker in your state; there may be a hundred percent financing. And you can ask the seller to pay for the closing costs. So you don’t need any cash. So you might be able to buy now if you have incoming and good credit.

So different, there’s some state stuff, bond issues that they have this available. But anyway, in case you can’t. So what happens is, so you wanna buy this 500,000 on a property, you’re gonna make these 500 a month payments. I know these numbers don’t make any sense to this, but you wanna, you think you can apply the $500 a month? You can’t. What happens is an appraiser comes when you’re ready to buy the property, and the appraiser does an analysis to say, “Okay, what is the market rent for this property?”

And let’s say the market rent was $400. So the only thing you can apply towards the purchase price is your security deposit and $100 a month. Because you have to pay the fair market value for rent, and this is just like a savings account for everything over that $400.

So you’re giving to the seller in advance. So if you just wanted to rent the property without that, you’d probably rent it for $400. So this is just, you know, you’re not getting any interest or anything like that. I mean, it’s a big number. Put the money every month in a bank account, and then you have a down payment that you’re saving up.

The other big problem is you don’t know what the value’s gonna be in 18 months. Nobody does. Could be higher, could be lower. So that’s why these rent to own things really never work out. So you’re better off renting a place that you want, you’re comfortable with, and putting away money and finding out about all these different types of programs that you can do a hundred percent financing with.

A lot of people don’t realize you can borrow against a 401 (k) to use as a down payment. You can get gifts up to a hundred percent on FHA and VA with some of these home buyer programs through Fannie and Freddie, you can get more gift. You can even get a second mortgage with 3% and do a 97 first mortgage. There’s so many programs out there, but with a standard Fannie Mae loan, you have to have 5% of the sale price, and then you can get a gift for the rest. Until you get the 20% down, you can get the whole 20% as a gift. That’s kind of the generics of it. But again, it varies by some of these specialty programs, and that’s what you should look into.

So lease to own sounds grea,t and we get a ton of calls. We can’t really help people, but that’s really the, the division of what you should do. It’s do it mutually exclusive.

How many, I mean, is it very common to have this lease-to-own, or is it just something some sellers offer? I don’t know. You know?

Drew Thomas Hendricks00:20:08

Yeah.

Fred Glick00:20:09

Different sellers have different themes to do it?

Drew Thomas Hendricks00:20:12

Is that just another word for seller financing, or is that something.

Fred Glick00:20:16

No, no, no, no, no. You get a real mortgage. It’s not seller financing. Seller financing is, you find a, you know guy who’s in his eighties, no mortgage on the property, doesn’t need the cash.

Live with his kids in Florida or something, and he just wants a monthly check. So he could say, “Look. Put X percent down and I’ll be your mortgage company.” Here’s the only thing. They have to charge you at least 4.35% interest right now. And that number changes. Cause imputed interest. So, whether you charge it or not, the IRS is going to assume that you got it and charge you on the interest, taxes on it. Yeah, but it, it’s be pretty simple. I mean, you do a, it’s a private mortgage. Like we have our escrow company has simple note and mortgage. That’s all you really need. You don’t need to go all the federal disclosures and everything. ‘Cause the private lending situation, and it might be you need it for, you know, a year, and you’re fixing the property up, and then you’re gonna refinance it afterwards. There’s many different reasons to that.

Drew Thomas Hendricks00:21:22

Going to a regualar conventional mortgage.

Fred Glick00:21:26

They’re not easy to find. It’s very rare, you know, be prepared for a real first mortgage and all that.

Drew Thomas Hendricks00:21:34

I see it more often like in rural properties like land…

Yeah. Because there’s not as much demand, that’s why. And then a lot of people buy these like plots of land out in the middle of nowhere and they’re, they want to sell it, but they don’t really, they’d just rather.

Fred Glick00:21:48

I saw a woman who’s went to upstate New York and went to this farmer who had, I don’t know, 10 acres let’s say, and she sharecropped like an acre from him. Paid him like 50 bucks or something, then she grew stuff. And then he was gonna sell her the, he ended up selling her the property and taking back the mortgage.

Just get the monthly payments from her. I mean, you can even do it a hundred percent. I mean, he was just done with it. He didn’t wanna work on a farm anymore. And she’s just paying ’em off that way. It’s one way to get yourself to farm.

Drew Thomas Hendricks00:22:21

I would say that I do see, I think that’s a little more popular in the, in the farms, especially with a lot of…

Fred Glick00:22:27

Older farmers.

Drew Thomas Hendricks00:22:28

Older farmers retiring, and then the kids right. Are off in the city doing something.

Fred Glick00:22:33

Kids are working at Google. Yeah.

Drew Thomas Hendricks00:22:35

Selling the family farm is not exactly, you know, hiring a real, this just makes it easier for someone else to move in and then they get the income stream.

Fred Glick00:22:42

Yeah, exactly.

Drew Thomas Hendricks00:22:44

Now, as far as this may be a tax question, so you’re doing seller financing, and someone buys the house through the seller for a million dollars, is that a million-dollar taxable event right then, or is it…

Fred Glick00:22:58

Oh, it’s a capital gain. Yeah.

Drew Thomas Hendricks00:23:00

So they have to pay the capital gains on it, and then they have to,

Fred Glick00:23:02

But if you’re married and you have the $500,000 exclusion and you’re not really paying anything, that’s fine. So the bottom line for sellers, if you’re gonna do this, go to your accountant before you do it. Before you sign a contract, please. So you gotta prepare. ‘Cause there’s some, you might get away with not paying federal, but you might have state capital gains. So each, each state is different. So, to your planning.

Drew Thomas Hendricks00:23:27

Figure out which in best interest for you.

Fred Glick00:23:31

Yes, exactly.

Drew Thomas Hendricks00:23:34

Let’s see. Have we reached the end of the episode already?

Fred Glick00:23:38

Well, I just wanted to say goodbye to a Californian.

Drew Thomas Hendricks00:23:41

Oh.

Fred Glick00:23:42

And I’m very happy that he’s leaving California. Goodbye, Trevor Zegras. The Anaheim Ducks gave him away to the Flyers today. It was just like, I read it, I had to read it twice. He gave him that guy a second and a fourth. Really? Anyway, hockey nerds will know what I’m talking about.

But  Trevor Zegras, one less person in California.

Drew Thomas Hendricks00:24:11

And now he is on the Flyers?

Fred Glick00:24:12

He’s on the Flyers, yes.

Drew Thomas Hendricks00:24:14

And that’s a good thing.

Fred Glick00:24:15

That’s a good thing. Yes, of course.

Drew Thomas Hendricks00:24:17

Let’s end on a positive note like that. Not one bit of politics. Look at that. We Fixed Real Estate. That’s the end.

Fred Glick00:24:24

Perfect.