I recently read an article in the Kansas City Star about how the tiny house trend has come to the Midwest. I have seen shows on tv about people searching for these tiny houses and found them to be pretty fascinating. I do have a hard time wrapping my head around the concept of living in a house full time that is smaller than most new homes master bedrooms. Of course, being a family of four, with a dog makes these houses impractical for my situation. The image of the 5 of us locked up in a 300-500 square foot box during a rainy day is the stuff nightmares are made of.

Having that said, I do understand the appeal of having it built on a trailer so you can travel and literally never leave home, and how it gets around most building codes since you are not affixed to the ground. Perhaps this is the new retirement trend instead of moving to Florida or Arizona. And can be more aesthetically pleasing than your standard RV.

But this article mentions how this trend is reaching down out of the retirees into the younger generation. I knew this to be true because I also found that a good number of the people on the tv shows were younger. This is where it gets interesting to me.

What is drawing this younger crowd to these tiny houses? Given that most young people are more tied down to jobs, schools, etc. So the traveling aspect is largely taken away. So what is left that is luring them?

I ask because it is an interesting dichotomy to what we have seen in the real estate market in the past several years. What we have found is that the average age of the first time home buyer is going up, as is the price of that first home. So what is happening is that the younger generation is waiting a little bit longer to buy, and when they do, they have more money to so. But that doesn’t mean they are buying the same “starter” homes the generations before started with, and putting more money down. No, they are skipping that segment of housing and going right to housing typical of that of an established family. Therefore leaving a void in that “starter” home market.

So what will it be, will younger generations continue to purchase bigger, higher priced homes first, or will tiny homes become the new “starter” home?

I think the answer will come in the form of seeing just how viable these homes are over the long haul with multiple generations of people. Then what happens to those houses when those younger people start having a family and need more space? Will there be a resale market for these homes? If there is not, then the trend will certainly die off.

Regardless, I do think it is a fascinating decision that people are willing to leave the space and conveniences of the traditional home for these tiny houses. I look forward to watching this trend and see where it goes over the next few years.

So what about you, could live in a tiny house? If you could, would you and why?

That is the question. But what does that mean? 1%?

In a word. Commission.

It has become more commonplace in real estate now to have a Realtor offer to sell your house for 1% commission. Sounds great, right? After all, most of the time you would pay 6%, 7% or even higher. So you have a chance to save some real money. On a house worth $200,000, a 1% agent can save you 5%, or $10,000 (assuming a 6% quote from another agent).  Nice.

On the surface this seems like a no brainer. Why wouldn’t I want to save $10,000? Here I will just leave the old saying, “If it seems too good to be true, it probably is.”  So here is the rub…

When you sit down and actually get the details, that 1% looks suspiciously like 4% before you have even had a chance to get comfortable in your chair. How you ask? What isn’t disclosed up front is that yes, you will be paying the listing agent 1% to sell your house. However, you also have to pay the buyer’s agent for bringing the buyer into the deal and doing all the work on that end. Typically, a 3% commission is offered.

So, now as you look at it, you are really saving only 2%, or $4,000 by using the 1% agent. Still a decent amount of money, for sure.

But, ask yourself this question. Do you want to work with someone who misleads you from the start? This is someone you are trusting to help you with likely the biggest transaction of your life. Is that a wise decision?

One answer might be; I don’t care. Saving money is saving money and it really doesn’t matter as long as I sell my house and save money. Fair enough. There are plenty of people who feel the same way and the perceived savings will continue to get those agents business.

Wait, you just said, perceived savings. Yes, I said perceived.

I say this because that $4,000 you believe you are going to be saving in most cases turns out to not be saved at all. Sometimes, you end up losing more. Let’s look at how.

What is that 1% agent not giving or doing for you? A saying that comes to mind here is, “you get what you pay for.” Logically one would conclude that the agent charging less money has to cut out services in order to survive. After all, a 5 star hotel cannot offer the services and amenities that come with its rating for a 2 star hotel price. Something has to give. Unfortunately, most people find out too late that those commission savings they thought they were getting are eaten up by time on market, price reductions, and overall bad negotiating on their behalf. Because something has to give for that agent as well. They have to do more deals to make the same money, so they have less time and resources per deal. Which means you get less.

The simple fact to remember is that houses do not sell themselves. Although sometimes it may seem like they do. In the background, what people do not see is a good agent has laid a ground work of talking to other agents/neighbors etc. before the house even hits the MLS. Buyers do not just stumble upon a house. Work has gone in to put that house in front of them. The less work an agent does, the fewer buyers see your house. And you don’t have to be an economist to know that means less demand means less money for you.

That $4,000 savings doesn’t look so good anymore when that agent doesn’t have time to market your house effectively and have it sit for sale for months, forcing you to do a $5,000 (or more) price reduction to boost interest, does it? It has now cost you more money using an agent charging less in commission. Believe me, this is more common than you think…But it can be avoided.

My advice to you is to interview several agents and find out how they work. Be less concerned about the amount you are paying them, and more concerned with the amount they are going to bring to you. Pick the one you can see the value they present. In the end, they are likely to be worth far more to you. Whether that be by getting you more money out of the house, save you a ton of personal time, or handle that tricky negotiation and keep a deal together. When it is all over, you will be glad you focused on the value and not the deal.