Past Marijuana Grow Ops

This article is in no way to be construed as legal advice expressely or implied. The information contained herein is the product of personal experience. You must get independent legal advice if you wish to proceed in the business of buying and/or selling a former marijuana grow operation.

Marijuana grow operations (MGO) are an increasing problem in the Vancouver (and Fraser Valley) area. The Vancouver Police estimated at one point in 2005 that there were between 10,000 and 14,000 active MGOs going on at any one time in the locale. As a means of combating MGOs, various cities have taken different measures. For example, various ‘Green Squads’ have been set up with the mandate of looking into things reported by concerned citizens, tips, and official reports and complaints.

You may be thinking that it is a profitable business to get into by buying homes that were previously MGOs, fixing them up, and reselling them. However, the process is far more complicated than this, and could lead to significant legal ramifications that are currently unclear in this business climate.

What makes it so difficult? Consider some of these facts: A marijuana grow operation will often alter the wiring and power in a house to help power the enormous number of massive bulbs that aid in the growing of the plants. Many larger operations will use 15 to 20 (or more) large bulbs rated at 1000 – 1500 watts each. This can result in a power requirement of 30,000 to 50,000 watts. As a result, massive use of power can result in power theft or supply alteration. The most common thing that an operator will do is to use ballasts to boost the power coming into a house. Normally, around 10,000 watts will come into a house, and using ballasts, it can be boosted to nearly any requirement. Of course, these alterations are rarely done ‘to code’ using proper equipment and techniques, and as a result, significantly increase the risk of fire and remediation. A recent study found that MGOs are 24 times as likely to catch fire as a normal residence due to the poor wiring, abundance of oxygen and nitrogen that result from the fertilizers, and modifications done to the home.

Another major problem is that of humidity. Normal humidity levels are around 30% – 50%. However, ideal growing environments for MGOs will require around 80% humidity. Increasing humidity in a home covered in drywall inside is not a science. Little protection is afforded the walls and structures aside from the negligible effect of vapour barriers behind the walls. Oftentimes, the humidity will exceed 80% and could climb as high as 90% resulting in massive growth of mould and mildew (including toxic black mould).

“Remediation” is the process whereby a contractor goes into a past MGO and removes all the apparatus and fixes up the home. There is currently no data available as to the long term effects of mould or toxic black mould on humans, but it should be noted that the consequences are almost surely bad.

Furthermore, as there are no standards for remediation, who can properly say whether a house has been cleaned out properly or if it presents some health risk? There is no way to answer these questions! This could pose the potential ‘home grown’ restoration expert substantial potential liability. There is no way of putting a dollar figure on this potential liability because no one knows the effects that past MGO mould and other chemicals have on people. The data simply does not exist! As a result, this type of investment poses a substantial risk and lenders are increasingly hesitant (if not totally against) lending against a property that was a past MGO.

RISKS OF REMEDIATION

As discussed above, the effects of exposure to mould are not yet known. When cleaning out a former MGO, contractors and/or the owner are likely exposed to the mould in great quantities. Furthermore, the ballasts often contain power for long periods of time once the power to the home has been cut off, and therefore, the remediation must be done in a very specific and technical manner by trained professionals. Taking apart the electrical apparatus within the house is often a delicate and dangerous business. Lastly, the massive use of chemicals such as fertilizers, insecticides, and bleach (to hide and kill black mould), results in an environment that is very dangerous to work in.

In summary, the risks are
1. Exposure to toxic mould which carries an unknown risk
2. Exposure to vast amounts of chemicals from fertilizers and insecticides
3. Exposure to a dangerous electrical apparatus that contains power long after the supply of power is cut
4. Potential exposure to booby traps set by the prior owners to keep out competitors

The risk doesn’t just end with the physical damage or injury. The potential for long term financial damage is also acute. For example, many major banks are so leery of lending against these properties, due to the host of unknown factors, that they will not even entertain the concept. For example, Genworth will currently not insure any mortgage on a house it knows to be a past MGO. For a more concrete lender example, having spoken with Scotiabank, they will not entertain the idea of lending against a property that is a former MGO, and they are surely not the only bank that holds this dim view of the idea.

There are some lenders that WILL lend against a former MGO, but they will often place many conditions on any such financing arrangement.

TIPS FOR SUCCESS
The purpose of this report is not to say that this isn’t a very profitable business for you in which you cannot make a lot of money. It is profitable, and you can make a lot of money. If you decide to go ahead with the project despite all these warnings, there are a few things to keep in mind:

1. Disclose, disclose, disclose! Do not attempt to hide the fact that the property was a past MGO. Honesty is always the best policy. You do not need the legal problems that this will bring your way in the long run. When your realtor lists your property they legally have to disclose if it was a past MGO. Failing to do so could result in legal challenges if it later becomes known.

2. Do not try to escape scrutiny by doing a private, non-MLS sale, with a quick close. Lenders (and the authorities) see this all the time, and it does not fool them. They are aware of what is going on. In fact, private sales with a quick close and no subjects are often subjected to the most scrutiny as it clearly appears that something is being withheld or hidden. As a result, you can expect extra investigation by the potential lender.

3. Do not try to avoid disclosure requirements by putting an addendum onto the Contract of Purchase and Sale and keeping the clear truth out of the main form of the contract. Although this might avoid liability for the buyer and seller (and I say might), it will not prevent the bank from calling the loan and demanding payment immediately if they catch wind of the deception (and/or legal charges).

4. Try to purchase the house in cash and finance the project yourself without the use of a mortgage. If you need a mortgage on the subject property, you should not be in this game. If you cannot arrange financing any other way, talk to a broker about the possibilities of using other forms of financing or structuring the deal so that everything is done above board and legally.

5. Do not try to get a quick close if you are doing this project! Make sure the closing date is at least 2 months down the road to allow for the bank to get an environmental analysis done on the property (if they ask for it). Doing otherwise is a risk that you must be willing to accept yourself. I strongly recommend against it.

6. Disclose, disclose, disclose!!! It cannot be stressed enough. Deception will land you in court or bankruptcy proceedings!

If you DO decide to move forward keep these couple of points in mind:

1. You will be required to get an air quality analysis done before any bank will approve you. This takes from 72 hours to several days depending on the demand, and will cost up to $1,000 or more if the lender demands a “phase 2″ environmental analysis. ALL lenders demand some form of environmental analysis or air quality analysis, so build this into your timeline and your budget.

2. You will be required to get a full appraisal of the property at a cost of around $250 with photos of the inside of the property so the lender is assured of the quality of the property they are taking as security.

3. Once the work is completed, you still need to disclose to potential buyers that it was a past grow-op, although you can mitigate the fear this causes by providing air quality and environmental analysis documentation UP FRONT when the property is listed so that potential buyers are put at ease that all is legal and above board.

IN SUMMARY
This articleis not to be construed as legal advice. I am not a lawyer, nor do I represent that I know the state of the law. However, I am a Mortgage Specialist, and I can tell you what the banks will and will not accept in the realm of financing a past MGO as I have been involved in countless past grow-op transactions (or attempted transactions) and can assist you in navigating these waters.

Commercial banks are showing an increasing reluctance to pass on the interest rate cuts to their clients. This could spark a change in the historical way that banks relate to prime rate and how they price their mortgages (how much of a discount they offer to their best clients).

Normally, when the Bank of Canada lowers its key overnight interest rate (the rate charged to banks) the banks have reduced their “prime” rate. Given that variable rate mortgages are pegged to prime rate and then offered a discount, this is how the Bank of Canada is able to influence interest rates that consumers pay. However, there is NO LAW that says when the Bank of Canada lowers rates, that the commercial banks have to follow suit. In fact, we are starting to hear squawking out of several of the large banks (TD, for example) mentioning that they may not lower their prime rate just because the Bank of Canada has lowered its rate. TD is just one example of a large institution that has made this statement. Now, the truth be told, they DID lower their prime rate when the Bank of Canada dropped its rate, but their hesitation is something very new in the market.

Each bank has its own “Prime Rate,” which is the rate that the banks give to their best clients. Just because RBC lowers its prime rate, does not mean that TD lowers theirs (although they usually do move in lockstep). Therefore, if you have a CIBC mortgage at prime – 0.75% and CIBC chooses NOT to reduce their prime rate, then you don’t get to take advantage of the lowering rates.

Historically, the banks have followed the Bank of Canada’s lead, but there has been a handful of times when they have not. Given the US Subprime problems, several banks south of the border are making similar complaints that they will not follow suit if the Federal Reserve in the US lowers their rates there. Now we are hearing similar complaints in Canada.

It is important to understand how the banks price their mortgages, raise their funds, and ultimately make a profit.

There are three parts to the equation:

1. The banks’ costs to raise money to lend
2. The banks’ mortgage pricing
3. The banks’ profits being squeezed

Historically, banks have raised money essentially by borrowing it. I’m not going to get into the exact mechanism as to how they raise the funds (as it is, frankly, rather boring, and you can email me directly if you want more info) but it is based on Banker’s Acceptance Notes, the overnight interest rate, and bonds. The important thing to know is that banks raise the money to lend NOT just from the deposits of their clients, but also by borrowing it from other banks, the Bank of Canada, and using other financial instruments and derivatives.

Borrowing money has a cost. Based on this cost, the banks set their “prime” rate, and price their variable rate mortgages based on some discount from prime rate (currently prime – 0.60% is the baseline rate in the market).

The banks profits is based on the “spread” between rate at which they borrow the funds, and the rate at which they lend them out. There are a few other elements in there, but that is the essential thrust of the money lending mechanism in Canada.

Clearly, if the Bank of Canada keeps lowering their key rates, but if the banks’ costs to borrow funds is NOT also declining, then they will be hesitant to lower their prime rate and take a lower profit. While it might sound nice, in concept, for the big banks and their profits to get eroded, when this happens, the rates that you and I pay will go up as there is NO LAW THAT SAYS THE BANKS HAVE TO LOWER THEIR PRIME RATE WHEN THE BANK OF CANADA LOWERS THEIR RATES.

Also, just because the Bank of Canada lowers their rates, this has nothing to do with whether or not FIXED rates will fall. The same banks-borrowing-to-lend mechanism is in place, and if the banks can’t make a profit by borrowing and lending, they will increase the price (the rate) until they ARE making a profit.

Two things of note from all my drivel above:

1. Just because the Bank of Canada lowers rates, does NOT mean that ALL banks will lower prime rate and that clients with a variable will automatically get the lower rate.

2. Just because the Bank of Canada lowers rates, does NOT mean that fixed rates will move. In fact, as of the writing of this article, it looks like the banks may RAISE fixed rates despite prime rate going down.

In a prior article, I explained that mortgages in Canada will have their rates quoted on a SEMI-ANNUAL compounding basis. Most other countries quote the rate on a monthly basis, and despite being in the industry, I have trouble wrapping my own head around what this semi-annual business means, and after discussing this with accountants, financial planners, and other brokers, it became clear that a write-up of how it works versus the more common monthly and annual compounding would be instructive.

This is a technical article that will go through the nuts and bolts of interest calculation. While it is not exactly fun stuff, it will serve to clarify the difference between the three most common forms of interest and the effect that each has on what you ACTUALLY pay on your mortgage. Ultimately, the rate on a mortgage is not as important as the dollars and cents that you have to pay.

All examples below will follow the same structure and will have the following assumptions:

1. Principle amount borrowed is $100,000
2. Interest rate used will be 10% (annually, monthly, and semi-annually)
3. No Payments will be made (so we can isolate the effect of the interest and its compounding)
4. All money is borrowed on January 1st and repaid on December 31st for ease of comparison
5. All numbers rounded to the nearest 1 dollar for ease of reading and presentation

ANNUAL COMPOUNDING

This is the most common form of interest in the consumer eyes, but in reality is not that common in the mortgage world. This form of compounding is the lowest overall EFFECTIVE rate (the rate you are really paying), and therefore it is the way that banks pay YOU such as on a term deposit or GIC.

Taking the numbers from above, here is how the interest would accrue and compound on an annual basis.

January $100,000 Outstanding
February $100,000 Outstanding
March $100,000 Outstanding
April $100,000 Outstanding
May $100,000 Outstanding
June $100,000 Outstanding
July $100,000 Outstanding
August $100,000 Outstanding
September $100,000 Outstanding
October $100,000 Outstanding
November $100,000 Outstanding
December $100,000 Outstanding + $10,000 Annual Interest Accrued and Compounded

Total $110,000

Interest Accrued is $10,000

This type of interest is typically called SIMPLE interest as it is a relatively easy concept to understand and calculate.
MONTHLY COMPOUNDING

The next most common form of compounding is the monthly compounding which is used on nearly all consumer loans, credit cards, student loans, retail cards, car loans, lease payments, and just about every other form of credit. It is relatively easy to wrap the mind around, but we will work through the numbers anyways to show how it is actually a higher rate of interest than the previous semi-annual compounding.

Taking the numbers from above, here is how the interest would accrue and compound.

January $100,000 Outstanding +$833 of monthly compounded interest
February $100,833 Outstanding +$840 of monthly compounded interest
March $101,673 Outstanding +$847 of monthly compounded interest
April $102,520 Outstanding +$854 of monthly compounded interest
May $103,374 Outstanding +$861 of monthly compounded interest
June $104,235 Outstanding +$869 of monthly compounded interest
July $105,104 Outstanding +$876 of monthly compounded interest
August $105,980 Outstanding +$883 of monthly compounded interest
September $106,863 Outstanding +$890 of monthly compounded interest
October $107,753 Outstanding +$898 of monthly compounded interest
November $108,651 Outstanding +$905 of monthly compounded interest
December $109,556 Outstanding + $913 of monthly compounded interest

Total $110,469

Interest Accrued is $10,469

As you can see from the two examples above, the monthly compounding results in $469 more interest paid than the annual compounding despite having the SAME QUOTED RATE of 10%!!! This is JUST the result of more frequent compounding. By compounding, I am referring to the banks calculating the interest, adding it to the principle, and then recalculating next months interest based on the new higher amount. In other words, the interest ON the interest. The more frequent the compounding (monthly vs annually) the higher amount you will ultimately pay in dollars and cents.

SEMI-ANNUAL COMPOUNDING

So if monthly compounding works out to being a higher amount of interest paid than annually compounding, semi-annual compounding (once every 6 months) should work out to be higher than annual compounding, but lower than monthly compounding.

Let us see if the math works out that way.

January $100,000 Outstanding
February $100,000 Outstanding
March $100,000 Outstanding
April $100,000 Outstanding
May $100,000 Outstanding
June $100,000 Outstanding + $5,000 semi-annual interest accrued and compounded
July $105,000 Outstanding
August $105,000 Outstanding
September $105,000 Outstanding
October $105,000 Outstanding
November $105,000 Outstanding
December $105,000 Outstanding + $5,250 Interest Accrued and Compounded

Total $110,250

Interest Accrued is $10,250

In summary, the amount of interest paid under each type of compounding is as follows:

$10,000 Annual Compounding
$10,250 Semi-Annual Compounding
$10,469 Monthly Compounding

…and if we take it a step further…

$10,516 Daily Compounding

The bottom line is that the more frequent the compounding periods, the more interest you will actually pay despite the fact that it still just says 10%.

If you really want to make yourself crazy, go look at your term deposits or GICs and then look at your credit cards… you will find that your term deposits (when the bank pays YOU) the interest is calculated annually in most cases, and that your credit cards (when you pay the BANK) are compounded monthly (or maybe even daily!!!). Just one more way that the bank always wins…

Clear as mud? If you have any questions, you can always give me a call at 604-657-6775 7 days a week, 365 days a year.

This is part one of a small series of articles I am going to write that will bust (or prove) tips and tricks for mortgages, payments, and how to pay less interest.

The topic of this article is “Payment Timing” and the idea that you can make extra payments at specific points in time in order to pay less interest on your mortgage.

The Interest Rate Act is a piece of Canadian legislation aimed at protecting the consumer from predatory lending practices. One of its sections makes lenders and brokers quote all rates on either annual or semi-annual compounding for the purposes of comparison. For reasons I will never understand, convention in Canada is to quote the rates on a “semi-annual” compounding basis.

Most people do not understand how semi annual compounding works, and for this reason, a myth has sprung up that if you make extra payments every 6 months (when it compounds) you are somehow avoiding paying as much interest as you otherwise would.

This is an incorrect conclusion.

Despite rates being quoted on a semi-annual basis, this is entirely done for comparison and legal reasons. The reality is that the banks convert this semi-annual rate to a daily rate and your interest compounds every day at the daily closing balance.

So, if you owed $100,000 at 5% semi-annual, you would still accrue $13.53 of interest PER DAY. The bank does not wait until the 6 month mark to compound the interest.

If you are going to make extra payments the tip is: make them on a payment date. This way, the entire extra payment goes to principle and interest will be reduced – starting the next day – as you will be paying interest on a lower overall amount. That said, making them mid-month is also good and the benefit of paying them on a payment date versus not paying on a payment date is negligible for the most part. However, if you are trying to squeeze every cent out of your mortgage, then make the extra payments on a payment date.

This is a question that brokers get hit with in nearly every single mortgage transaction and appointment. The truth is, the answer is NOT straight forward. The answer varies for each client and their unique situation. Yes, there are some compelling reasons to take a variable rate mortgage, but there are also some very good reasons to avoid them. This article will attempt to articulate the argument between a fixed and variable rate mortgage.

First, it is important to define what we are referring to when we say fixed and variable. Note that I am NOT referring to “open” versus “closed.” A fixed mortgage is one where the rate is the same for the entire term of the mortgage. In Canada, the industry standard is 5 years. For example, 5 years at 5.19% is the best rate that I currently have available through any lender. A client choosing that product would pay 5.19% on the money that they borrow for the entire 5 year term. No matter what rates do in the market, the client is guaranteed to pay only 5.19%

A variable rate mortgage is pegged to some other rate, usually prime rate, at the bank you are dealing with. Currently, most institutions are offering prime – 0.60% with prime at 4.75% for a net rate of 4.15%. There are a couple of variations of this mortgage type:

1. Fixed Payment variable mortgage
2. Variable Payment variable mortgage

The fixed payment variable rate mortgage offers one fixed payment regardless of what rates do. However, should rates fall and fall and fall, your payment does not go lower, but more of your payment goes towards the principle. This is better for peace of mind as you know what your payment will be, but the bad part is that the rates may rise and your payment may be insufficient to pay down the mortgage and your bank will not call you to advise of this fact until long after it occurs. I have had MANY clients absolutely furious with their bank because they actually owe MORE after five years than when they started!!!

A variable payment is the more common version, and the payment varies from month to month as prime rate changes. This is the optimum method for minimizing your payment, but makes cash flow planning more difficult if you are very budget conscious and like to micro-manage your finances.

Most of the variable rate mortgages that we set up, as brokers, are of the variable payment variety. Therefore, this discussion will focus primarily on variable payment variable rate mortgages, although the argument is valid regardless.

ADVANTAGES OF A FIXED RATE MORTGAGE:

1. Set Payment
2. Peace of Mind
3. Cash-Flow Planning
4. Stability

With a fixed rate mortgage, there will never be any surprises. Your mortgage payment will be the same from the start of the term to the end of the term. You will the peace of mind that comes with certainty. Given that mortgage payments usually represent the single largest expense in a family budget, this will greatly assist in cash flow management and making sure enough money is in the account to pay the mortgage each month.

It is important to look at your individual situation and ask yourself, “If my mortgage payment was $100 more next month, would it affect my lifestyle?” This is a very real consideration, and a very legitimate concern. With a fixed rate mortgage, this question becomes irrelevant. If your income varies from month to month such as with self employment, substantial commissions or bonuses, then a fixed rate mortgage is often a nice thing to have as at least one element of your monthly budget is not going to vary. My experience is that a variable rate coupled with variable payments coupled with variable income, is a recipe for disaster. If you do not have a very tight control of your budget, then a fixed rate mortgage is for you.
ADVANTAGES OF A VARIABLE RATE MORTGAGE

Many people can be heard to quote, “historically, people with variable rate mortgages pay less interest.” The reality is that: THEY ARE CORRECT. If you look over the past 25 years, in which rates have been declining consistently, a person that had taken a variable rate mortgage all the way along would have paid less interest. This is largely due to rates constantly falling, but it is nonetheless an accurate statement.

Even if we just look at current market rates, as of today, May 5th, 2008, you can see a vast “spread” between what a person taking a variable rate mortgage would pay, and that rate which a person would pay with a fixed rate. The best rates available are:

Fixed rate = 5.19% (Depending on qualification of credit, income, etc…)
Variable Rate = 4.00% (Depending on qualification of credit, income, etc…)

On a $300,000 mortgage over 25 years this would be a savings of approximately $200 per month! Over a 5 year term, that would amount to a savings of $12,000!!!! However, there is a huge assumption built into this analysis, and that is that rates will not change during that period of time. Given that we are at near historic lows in Canada, and have been so for several years, there is not a lot of further room downwards on rates, but there is a lot of room upwards.

However, despite the risk of rates rising, there is a further mechanism in place with most variable rate mortgages that makes them a solid choice: convertability. Most institutions all the clients a one-time option to convert to a fixed rate at any point in the 5 year term, so long as they fulfill the original 5 year term. For example, if you were 2 years into a 5 year term and saw rates on the rise and wanted to “lock in,” you would switch over WITH THAT INSTITUTION into a fixed term for a minimum of 3 years – so you fulfill the original 5 year commitment. This sounds like a great idea, right? There is a catch…

In most cases, the rates that I can get client (5.19%) for example on a 5 year mortgage are NOT available at conversion. Oh, it’ll be a good rate. The institution won’t “rook” or “rob” you, but they ARE going to exact a small premium. Sometimes the institutions will even go so far as to put the following text in your mortgage documents:

“This variable rate mortgage is convertible to a fixed rate mortgage at the then-available discounted rate.”

However, if you talk to most brokers, they will explain to you that oftentimes there are better rates available for new clients and other institutions than those available from the lender that is offering the conversion option. The bottom line is to check with your broker before signing up to a variable rate mortgage and be perfectly clear on the conversion options as well as how to physically take advantage of them.

Clearly, the debate over whether you should take a fixed or variable rate mortgage is fairly involved. It depends on your personal situation as much as your risk tolerance and need for peace of mind. Talk to your broker to determine which the best option for you.

I take questions all the time from clients looking to sell their current home and buy a new one. With commissions seeming outlandishly high in Vancouver (largely due to property prices) they often think that sidestepping the realtor will save them money in the process. My personal opinion is that nothing could be further from the truth.

Realtor commissions have historically been based on property values. In Vancouver, the standard commission is 7% of the first $100,000 fetched and 2.5% of the balance. For example, on a $400,000 condo, the standard commissions are $14,500. This figure might seem way too high given the speed at which real estate has been selling over the past few years, but I believe it IS justified. Many sellers can be heard to ask, “Why should I use a realtor?? All they are going to do is list it on the MLS and it will sell in just a few days. That isn’t worth $14,500! I can do that myself”

The reality is that, no, you cannot replicate their services. Using a realtor does a number of things:

1. It ensures your contract is drafted appropriately to protect your interests (in the event the contract is done incorrectly and your interests are compromised, you can sue the realtor who carries errors and ommissions insurance).

2. You tap into the MLS system and the massive amount of traffic that it generates both online and via realtor contact.

3. You have an industry professional representing your interests in a complex and highly litigious area of contract law where contract wording is vitally important.

4. If you are a BUYER you pay the realtor NOTHING. The seller pays the realtor commissions so why would you NOT choose to have your own realtor???

5. Like any profession, realtors have a reputation for how they conduct themselves, and your realtor may know of or have had past dealings with other realtors and can advise you on how best to deal with them.

6. If you are a SELLER, your realtor will pay for all advertising in newspapers, internet, flyers, mail-outs etc… This is a highly expensive type of advertising that is included as part of your commissions you pay as a seller IF you are using a reputable, full service realtor.

7. A good realtor has experience negotiating as there are many, many concerns in a real estate transaction other than price. For example, financing, subject clauses, environmental concerns, inspection coordination, appraisal coordination, proper timing of dates, selection of proper contractual clauses, etc…

8. Your realtor can guide you through the closing process and make sure you understand each and every step. The process is complex with a myriad of critical dates, timelines, and rules. Your realtor is intimately familiar with the process and can make sure this complex process occurs smoothly.

9. Realtors subscribe to a strict code of ethics and can be barred from plying their trade if they behave below a prescribed standard.

10. Your realtor can properly assess the TRUE market value of your property, or property you are considering buying, by reviewing historical data, current sales, and other information that is not otherwise publically available.

This is not an exhaustive list, but is the list that I provide to clients when they ask me the age old question:

Why should I use a realtor??

Just a sidebar because I’ve already been attacked for the first publishing of this article: Not all realtors are created equal. My opinion, which is all this entire BLOG is, is that “you get what you pay for.” If you have one realtor promising you a quick sale for a flat $5,000 commission, and another demanding a full commission, don’t immediately jump at the lower sticker price.

The fact is your property CANNOT be properly marketed for that lower amount (in most cases) AND pay the realtor a sufficient amount to make a good living. Which area do you think suffers? Your marketing, or their lifestyle?

Just as one example, a good realtor may be able to get you a much higher selling price that will FAR offset the slightly higher commission. Just like manufactured goods: when the price is super low, the quality is immediately suspect. That is not to say that no discount realtor can provide a good service. If the market is hot, and sales come quickly, then perhaps your property will require little marketing. My opinion, however, is “why take that chance?”

Bottom line: Get a good realtor whether you are a buyer or seller. Interview a couple, choose one that has a good rapport with you and a good track record in the market (not just a friend of a friend). You will be glad you did.

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