THE UPSIDE DOWN HOUSE… in Real Estate Sales it is your job to find the people who want you to help them sell their house. You market their property, locate a buyer, put together an offer, and they eventually move. After the deal closes, you get paid. Pretty simple. Sometimes you can get caught in a situation where there is not enough money left over for you to get paid! I call this the “upside down house”. It turns out that they owe more money to the mortgage lender than the sale price will support, so there are no funds left to pay your commission. To accept that possibility is ridiculous.
Consider this, if you worked at a salaried job and your employer informed you that, “we expect you to come to work this week but you’re not going to be paid anything”… wouldn’t you find a new job? Of course you would. You work… you get paid… if not, work elsewhere. You don’t spend time where you don’t get paid.
Here is your ACTION STEP…what to do when working with a potential Seller who has an “upside down house”?
1. Show them “the numbers”. Prepare a simple Net Sheet outlining the cash flow of their transaction including all possible expenses (legal, penalties, property taxes, your commission, etc.).
2. If the numbers do not add up, ask them… “What are your plans to deal with this shortfall?”.
3. Critical Question: “Mr./Mrs. Seller, if it turns out that there is not enough money to close this transaction, are you in a position to pay the extra $10,000?”
4. Last resort is to have them find out if their lender will allow the transaction to continue and accept the shortfall at their end. Don’t get caught into “maybes”. Make sure you confirm everything first-hand. Gambling not allowed.
5. Be sure to price the property based on its Market Value… not on “how much is needed to make the deal work”. Buyers have little sympathy for that approach.
It all sounds so simple when you see it written down like this. The fact is… it is that simple. Do not put yourself in a position of “needing a listing” so badly that you put your paycheck at risk… not to mention your self-respect. Get all the cards out on the table up front. If you are not going to get paid, don’t take the job! A much better alternative would be to find someone who really needs you and apply for that job. Wasn’t earning money one of the main reasons you got into the business in the first place? Protect yourself. NO Excuses.