Did You Know: Dual Agency

Dual Agency Dilemma

FYI: “Dual Agency” can be harmful to your health.

The things you have to be careful of continue to multiply. Even a large percentage of the things which are completely legal can come back to bite you in the proverbial “you know where”. One of those things is dual agency. Such a nice sounding phrase. Could end up hurting you about as much as a friendly rattlesnake.

You may not know the word but you have probably been involved in a dual agency relationship without being aware of it. Dual agency exists when a professional represents a person to handle an issue and then also agrees to represent the other party in that same transaction. Most folks would think you were crazy if you decided to use the attorney who is representing your spouse in a divorce against you. You would clearly see that is not likely to end up with the result that is best for you.

Yet, in the real estate world, not only is dual agency common practice; it is totally legal. Most real estate agents are unhappy if anyone (especially me) says that dual agency is seldom your best choice. When an agent represents both sides of the transaction, they get both sides of the commission. That is good for them; not necessarily so good for you. It’s called a “conflict of interest”. Suffice to say that just because the law allows it, that does not mean that regular professionals can balance the opposing needs of two different parties and get the resolution which is best for EACH party. Consequently, the professional is happy, most often the other individuals feel a tad bit taken advantage of.

Anyone who has ever bought a house using the agent who had it listed has participated in a “dual agency” situation where the agent represented both sides of the transaction—the SELLER and the BUYER. If you take a poll of the folks who have done this, most of the buyers and some of the sellers think they got a raw deal BECAUSE their agent was looking out for the other party. Some will tell you that they did not understand that the agent WAS representing the other party as well. You may be surprised when informed that you signed a document which stated you were agreeing to the “dual agency" representation. You made it legal by virtue of your signature.

Dual agency is legal; requires the signature of both parties that they understand and agree to such representation; and is likely to give you heartburn.

Solution: Don’t Do It! Select your own representation, someone who has an exclusive commitment to represent your best interests. You want your agent to recommend the toughest inspection company and then fight to have all the repairs completed which are reasonable under the law in your state. A dual agent has to look out for both parties and is much more likely to find an “easy” inspection company, go light on recommendations for repairs and try to placate everyone, thereby satisfying nobody but themselves.

Would you like to share your spouse??? Is dual agency really in your best interest?? I told you, “don’t do it.”

Copyright © 2009, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Short Sale Buyer: 10 Critical Areas of Concern

Short Sale BUYER

Ten (10) Critical Areas of Concern

If you are thinking of buying a home in today’s market, there is a pretty good chance that you will find a home you like which is upside down (seller owes more than the house is worth in today’s market and the sale will require that the lender approve a short sale). Buying a ‘short sale’ is not necessarily a BAD thing but it is definitely a DIFFERENT thing than a regular purchase and so you need to ask yourself some important questions before you embark on this journey. I am going to assume that if you know the right questions to ask that you will be diligent about getting some good answers before you move forward.

Here are areas where you need to do your homework:

1. AGENT—Is your real estate agent experienced in working with short sale buyers? Know how short sale transactions differ from regular transactions? Provided you with sufficient documentation to help you know what the current value of the property is?
   
   
2. TIMING—Are you aware that it could take months (several months) for you to get an answer and go to closing on a short sale? Can you afford to wait for an indefinite period of time? Can you STAY in your current housing until you get closed—however long that might be? Did you know you can decide to walk away anytime you want to even though you have made an offer? Simply tell your agent to rescind your offer if you want to consider another house. (You know to do that in writing, yes?)
   
   
3. NEIGHBORHOOD—Have you done the research you need to do to be sure that the back side of the neighborhood is as appealing as the front side? Are you comfortable with the mix of owners vs. tenants in the neighborhood? Is the neighborhood moving more toward tenants? Are homes well-kept or more of them in disrepair? Have you driven the area at night—do you feel comfortable with the nighttime look and feel of the area you will be calling home? Is there a significant numbers of homes empty—whether for sale or otherwise available for occupancy (rent, lease, etc)? Are property values still falling or have they hit a plateau? Where did you check? (and don’t tell me you just asked your agent). Are you comfortable with the levels of taxes in the area? Are there any special assessments which you need to consider? If there is a neighborhood association, how financially sound is it? Have you stopped and talked to neighbors to see what is REALLY GOING ON IN THE NEIGHBORHOOD?
   
   
4. PROCESS—Did your agent carefully explain the short sale process to you? Did you ask for a response based on how long you are willing to wait (2-3 months) or based on the traditional practice of allowing only a few days? You wrote an offer which was presented to the local owner/seller but then forwarded to their lender/servicer for consideration. Are you aware that the lender may/will consider multiple offers and then make a decision on ONE of them? Were you warned that the Lender may counter your offer—after a very long time—even months after you initially wrote the offer? Are you prepared to increase the amount you are willing to pay or risk losing the house? Have you pre-determined how much you are willing to pay? May I suggest that should be the amount you should offer in the first place?
   
   
5. RISKS—Are numerous but forewarned is better than being caught off guard. Risks include:
   
   a. The SELLER may file bankruptcy—and the house cannot be sold to anyone
   
   b. The LENDER may foreclose and the property become unavailable
   
   c. ANOTHER OFFER may be accepted instead of yours (even if the seller signs your offer that does not mean that the LENDER/SERVICER is going to approve your offer instead of another one which they have received)
   
   
6. LONGTERM—Have you carefully considered whether this house meets your long-term needs (say for the next 10 years)? Lifestyle? Location? Size? Amenities? Condition? Does it have ‘growth potential’?
   
   
7. FINANCING—Do you already have a firm loan commitment from your institution—not a pre-approval? You should start out with a /loan commitment/ to increase your chances of getting your offer accepted and to avoid any surprises down the road. Can your lender use the appraisal recently acquired by the selling institution in order to speed up the process at the end? Did you know that your earnest money check should not be cashed until AFTER you have an offer accepted by the LENDER who is the real decision maker on a short sale transaction? (That could be 3 months from now.)
   
   
8. INSPECTION—Are you aware that most states allow you to have inspections on any property which you wish to acquire (including REO’s, short sales and anything listed ”as is”?) Is your agent encouraging you to have a full property inspection as a way to be sure you fully understand the ACTUAL condition of the property you want to acquire? (Good agents will insist that you should, especially on a short sale which probably has not been well maintained if the home is in foreclosure). Are you aware that you can decide NOT to move ahead with the purchase if the inspection shows some substantial issues which are unacceptable to you?
   
   
9. REPAIRS—Are you prepared to cover the cost for any repairs which are needed immediately (and in the near future) once you close? Have you gotten estimates based on the items uncovered during the inspection?
   
   
10. GETTING TO THE CLOSING—Are you prepared to wait a few or several months to get to the closing date? Are you comfortable knowing you may be asked to increase your offer amount at the last minute, once the lender knows EXACTLY how much is needed to make the deal work under the guidelines from the Guarantor on the loan?

I am a firm believer that if you point someone in the right direction, they will usually get where they were headed. These are not ALL the questions you need to be asking but you are certainly headed in the right direction.

A short sale does not have to be a nightmare. Not with an experienced agent and a well educated consumer. Good luck with your new home experience.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Q&A: Highest and Best

I am sure that the person who submitted the question below will have made a decision before they have a chance to get my answer. In any case, the answer could be helpful to anyone who has or might write an offer on an REO property so I am including it on the website.

Q. My wife and I wrote an offer a week ago on a bank-owned house and today our agent told us that the bank has another offer in addition to ours and gave us an opportunity to change the offer if we want to and give them our ‘highest and best’ offer by 5 p.m. tomorrow. Is this common? How should we respond?

A. First, just as a point of clarity, we are talking about a fairly common practice when you are trying to purchase an REO (real estate owned) property. The process of purchasing such a property is significantly different. The guarantor or lender who is selling such a property is interested ONLY in the highest net dollar amount. One way to increase the net is to encourage competing buyers to make offers on the same property (creating a multiple offer situation). Once the agent who represents such a seller is holding more than one offer, the strategy is then to have them compete against each other which results in a higher amount being offered for the home.

This process has rules. All potential buyers should be given the same time frame to respond and either increase their offer amount or re-affirm the amount they offered before is, in fact, their ‘highest and best’ offer. This option should be provided to the buyer’s agent (via fax) and provide for a signature so that the buyer’s agent can confirm that they have received the notification that the buyer needs to respond by a specific time.

The time frame for response varies but it is not uncommon for it to be 24-48 hours. A buyer has the option of withdrawing their offer if they decide they do not wish to participate in the bidding war. A buyer who is still interested and wants to increase their bid should be certain that their agent gets their revised offer in prior to the expiration of the required time frame. A follow-up phone call would be appropriate since the seller is going to make a decision based on the offers they receive during the stated response time.

Copyright © 2009, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

So, you think you want to become an REO Broker?

Get ‘Em Listed and Roll in the Dough…

It happens every time I teach a class (and I just had an (FIS) class in Charleston last week). Several of my students will get all fired up about becoming a listing agent handling REO’s as the fast track to real estate success. Even though the class is (and is advertised as such) designed to help REALTORS learn how to be successful with options to AVERT foreclosures, someone always attends for the SPECIFIC purpose of meeting me and having me tell them the short cut to becoming a Fannie Mae broker or a representative for some other REO account. Aside from the fact that that is not the purpose of the training, there will always be someone who is persistent in trying to move conversation in that direction.

This article is for you—you know who you are.

Ah-h-h, the Cushy Life of an REO listing agent

I’ve been there, done that, got the T-shirt AND the award. I received the 1st Rising Star Award as Rookie Broker of Year for the United States from Fannie Mae in 2000. They were right on target with their assessment; my star has been rising, (also drifting, getting lost and other mundane contortions) ever since. Oh, but I digress.

The truth is that my Fannie Mae experience was, overall, a really good one. I received excellent training at the Disposition Center in Dallas, and great support from my initial salesperson, Shirley Mastenbrook. I learned how to effectively price property based on a precise analysis of market data and I sold a heck of a lot of Fannie Mae homes. My sales volume and income both increased dramatically. However, my life, as I knew it, completely disappeared. It’s emotionally devastating to process a forceful eviction. To be the person who stands there and officially authorizes someone to be thrown out of their home. Being property manager extraordinaire is an emotionally draining and time-consuming gig.

It’s a New Day

The REO market is booming and in some areas there are more REO’s available than traditional listings. Loss mitigation efforts, including modification and short sale attempts, have slowed the number of completed foreclosures even though the number is still unbelievably high. However, the amount of ‘shadow’ inventory (REO’s being held by guarantors and NOT being placed on the market) is estimated to be a significant amount and must eventually be placed on the open market.

Market dynamics are rapidly evolving. A new mixture of guidelines for disposition changing in response to market conditions and/or government regulations, recommendations or directives and REO owners all serve to make today’s REO broker’s job a very challenging one. The practicalities of good business decisions shaping what will or can be during the time period the REO is under the control of the guarantor or lender is fluid. When you own or manage a few properties you can be almost casual about how you dispose of them. When you own thousands upon thousands, stacked on top of each other, you have to utilize a more systematic, inventive approach in reducing those expenses which revert to you and become vigilant in avoiding any expenses you can. Utilization of a strong contract, with strict adherence to its dictates can mean survival or failure to survive. Whether expenses are moved to listing agents, buyer’s agents or buyers is immaterial; what is important is that anything which can be shifted to someone else, be shifted. The list is growing—now even eviction costs have been added to the list of costs which can be shifted to someone else.

Flies in the Ointment

Nothing messes up a good plan faster than messy details. It should not cause you concern if the dollar amount tied to a detail is a small number, with only two place holders, like $99.00. It gets serious when the numbers are BIG numbers, with 3 or more placeholders, say $475.00 for instance.

Likewise, phrases such as “shall maintain the premises” are not a big deal, unless the premises include a pool or some other high maintenance component. Assuming the responsibility to maintain can keep a person awake at night better than a crying baby. Didn’t they explain that ‘handle utilities’ meant that ‘deposits when required’ would come from your checking account? I suggest you re-check your account balance to be sure you can AFFORD to be an REO listing broker. It’s good business, if you can get it—provided you are sure you understand what you are signing up for.

Re-imbursement is on the Way

**Insignificant detail—To be delivered by deranged carrier pigeon who will be dispatched later this year.

I am not throwing snipes at Fannie Mae. They did an excellent job of processing reimbursements and doing so in a timely fashion based on the criteria they had set for their agents. However, things could be dicey IF you forgot to submit invoices on time. REO sellers are SERIOUS about their deadlines. You miss it; you eat it!!! No equivocating. You agreed and said you understood, this is a business, not a game for newbies who want to play at REO sales. Suck it up, write the check and remember to check due dates more carefully in the future. If you want to depress me, e-mail me and ask about the $15,000.00 I had to shell out after missing a few deadlines—it doesn’t take long for carpet and paint to run into some serious money. BIG numbers, with five place holders—like $15,000.00.

REO’s can be LEASED

Awesome plan! Announced by Freddie Mac in January of ‘09 and Fannie Mae in November of ‘09. This is the deal. Both organizations were (and remain) concerned with the increasingly large inventory of foreclosed properties as well as the public perception that they are not doing all they can to help alleviate the problem. Both have begun lease-back programs so that either the former owner of the property or a tenant placed there by the owner can lease the home back—AFTER foreclosure.

In a nutshell, the Freddie plan is a month-to-month lease, at current market rent. The property will be on the market during that timeframe and the new BUYER assumes responsibility for the eviction process and related costs to get the occupant out of their new home.

The Fannie Mae plan is essentially the same, except that it allows for a one year lease period. If you are the REO broker for either of these guarantors you have the honor of explaining the particulars and the implications to a buyer’s agent. What appears to be a win-win for Fannie or Freddie and the occupant can become a nightmare for the agents involved and a potential purchaser. The magnitude of unintended consequences is enough to make my hair go straight (and I have a very short, curly Afro). I suggest you take a crash course in landlord-tenant law in your state. Additionally, please check to be sure your E&O Insurance premiums are current.

Would I do it again?

The truth is, I might be tempted because of the guaranteed revenue stream. The reality, however, is the same as the prospect of teaching middle school kids: someone has to do it but I am not that hard up yet. Having sold REO’s for 2 ½ years, very successfully, I can see how dramatically the terrain has changed. Today’s REALTOR has a lot more risk, many more potential ‘bosses’, and fewer clear guidelines in an arena which mimics the wild, wild west pretty closely. Training by the companies who select agents is almost non-existent. The entire process is further complicated by the fact that you are stepping into situations like the landlord scenario I mentioned in the paragraph above.

For agents who decide this is still the route you wish to pursue, I’d like to share some thoughts on making an informed decision.

The Five Star Conference, complete with training institute, offers just what you need—but the entire cost for that training will be at your own expense. The timing of the annual event may not coincide with when you want to get started and there are numerous other challenges to concern yourself with as well. Learn how to perform a professional BPO (www.fanniemaebpo.com) so that you are really good at determining property value PRIOR to the listing. Additionally, it might be beneficial for you to read the actual contract used by the guarantor you think you want to represent. I am suggesting that you read both the listing agency contract (which you and your broker will need to sign) and the contract which you will provide to buyers/buyer’s agents. You can learn a lot about the firm you will be working for by studying the documents which will bind you to them.

REO sellers do not all require the same level of service

It is important that you pre-determine what type of REO listing agent you want to be: an agent who only lists properties (such as HUD homes) without an obligation to handle utilities, etc – or does property management to a degree (Fannie Mae or Freddie Mac) or offers an even broader range of services such as rehab, keeping utilities in your name and a full menu of other services. Then only seek or accept listings from an REO seller whose needs mesh with those services which you are willing to perform.

I would caution you to avoid seeing the REO business as something you will just ‘tack on’ to the rest of your business. Most REO sellers are very demanding. Their volume is growing faster than mushrooms and a huge quantity of ‘shadow’ inventory is just waiting to be released. It would be wise to see this as a major part of your business and to make a decision based on whether you were prepared or willing to shift and become primarily an REO seller’s agent if this is the path you chose. If you do well, the volume will definitely follow. If you do poorly because you cannot handle unexpected volume, they will drop you like a hot potato and never speak to you again. They take “failure to perform” very seriously.

I would encourage you to talk to some agents who have listed REO’s within the past 18 months. Sit down with them over dinner (your treat) and ask for an honest analysis of those things which they see as problematic.

Your final question to them should be: “What is the worst thing that could happen?” Consider their answer. If you can live with the worst thing that could happen, then go for it.

Best of luck in the REO world.

Happy to be a “Former Fannie Mae Broker”

Copyright © 2009, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Q&A: Home Inspection—Worth Every $$$$

Q: We recently sold our home using a REALTOR, a septic tank test was not done. The REALTOR did not suggest we have the house inspected and it did not occur to us that we should do so. Who should have had made the arrangements for the septic test and made sure everything was up to code?

A: Your question is an excellent one and points out the need for a pre-inspection to be completed by you, the seller, BEFORE you list your home. I have to lay responsibility for this one at your agent’s feet. Yes, it is your house and you are responsible for maintaining it but the biggest part of what you pay a real estate commission for is ‘sound recommendations from a professional whose training should have prepared them’ to tell you what I am about to tell you.

Your question was: Who should have made the arrangements for the test? It is unimportant who made the call, you or your agent, to a septic company to come out and do the inspection. Either your agent could have handled that on your behalf or made several recommendations so that you had picked up the phone and actually called someone.

The missing piece seems to be that there was no discussion about the NEED for such an inspection at the appropriate time. Pre-inspections save sellers a lot of heartburn and usually a lot of money as well.

In the industry, agents are pretty divided and very vocal about whether or not it is in the best interests of a seller to spend the money for an inspection which would have uncovered this problem (as well as any other major problems). I am adamant that a pre-inspection should be conducted on any property which is more than a few years old because of the strong possibility that problems exist which can best be taken care of BEFORE the listing has occurred.

Opponents of pre-inspections insist:

1. That the seller should not waste money on an inspection when the buyer is going to have one anyway
2. That the seller is unnecessarily spending $300-$400 which they could make better use of by putting in some flowers

Proponents of such inspections (I am the UNOFFICIAL president of this group)

1. Believe that you would avoid uncovering something which could be a deal breaker AFTER you have an accepted offer (don’t you hate when that happens?)
2. That the cost is a wise investment in the success of your real estate transaction
3. That if you uncover any significant problems you are in a better position to search out the right professionals to correct them and price shop for the best value as well as schedule that work at your convenience rather than be in a rush to get it done
4. That if the needed repairs represent a significant investment, then you can adjust what you’re considering listing the house for rather than have an unexpected expense eat into your profits at the end
5. That an investment for the “extra” inspections (mold, termite and septic system) of $200-$300 above the base cost could save you thousands of dollars at the back end since you can’t renegotiate the sales price AFTER the buyer hits you with repairs which are mandated as allowable under your state’s SELLER DISCLOSURE law. A septic repair/replacement would definitely be covered in most states and a repair could cost upwards of $1,000. The replacement of the septic system or an expansion of the field or the finger system could set you back MANY thousands of dollars. Likewise, a possible termite problem should keep you awake at night, UNLESS you had a pre-inspection and know that you don’t have any.

I could share several terrible, very, very horrible stories of bad things which happened because of major problems which were uncovered during an inspection when I represented the buyer. I will share only one—as briefly as I can. My buyers discovered active termites and significant termite damage during our inspection.

Additionally, there was a crack in the interior chimney wall. This was a lovely $350,000 home and the sellers could have and should have corrected those items before it was listed. The problems were, in fact, fixable. The sellers initially offered some half-baked resolution, which we rejected.

My clients were prepared to walk away and even leave their $3,000 earnest money on the table. They just didn’t want the house any more. A house they had loved and had picked as their retirement home. I prepared a very precise inspection response—quite frankly asking for more than they had to do and they refused. We requested and received a mutual release. We had to fuss a little bit, but their earnest money was returned.

The sellers of the home had already started construction on their new dream home, had had this house on the market for more than six months and now they had to start all over trying to find a new buyer. Plus, they still had to fix everything they should have fixed before. All for lack of a pre-inspection.

During my career as a REALTOR I helped many clients terminate the contract (and get their money back) as the result of significant inspection issues we could not come to terms over.

Much of the time we walked away from the transaction if the seller was not willing to give us EXACTLY what we wanted in the way of a fix. It is definitely not a position of strength for the seller to discover they have any major issue in the time leading up to a possible closing.

After helping numerous buyers ‘walk’ because we were not satisfied with the compromise of repair or other concessions from the seller, I eventually established a personal policy of refusing to list a home unless the seller agreed to a pre-inspection with one of the toughest inspection companies in the city and further agreed to repair the offending items before we listed.

Like I said, I have to drop this at the feet of the REALTOR for failure to adequately prepare you for just such a situation as later occurred. Additionally, I would be interested in whether or not the septic system is specifically addressed on a Seller’s disclosure form, if your state uses one. Any agent worth their salt would have checked to be sure you understood all the questions you were being asked on such a form.

The issue of pre-inspections gets my adrenaline flowing. I should probably go have a glass of tea.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Your Real Estate Advisor: 4 Prudent Rules for Buyers of Short Sale Listings

Four Prudent Rules for BUYERS Who Write Offers on Short Sale Listings

Rule 1: STAY PUT: Do not give notice in your existing housing until after you have closed on a short sale listing. Even if you have to pay a significant amount to go to a month to month arrangement where you currently live. The path to a closing on a short sale listing could get bumpy. The seller might:

1. File for bankruptcy which removes the home from availability
2. Receive an offer from another potential purchaser which the lender decides to accept instead of your offer
3. Lose the home to foreclosure in which case you will no longer have a valid offer and will need to attempt to purchase it as an REO, if you are still interested

Rule 2: BE SUSPICIOUS: If your offer is signed by the seller very shortly after you write the offer (within a few days) then the chances are pretty good that the seller signed without the lender’s approval. There is no guarantee that the lender is going to approve. Most likely you have a listing agent who does not clearly understand that “lender approval required” means the “Lender has the right to accept or reject any offer which is not to their liking”. Everyone should wait until you have the lender’s “required” approval for the acceptance of a short sale.

You should not be celebrating that you are going to be closing if the seller signed but you do not have the lender’s approval. Lenders make the final decisions on short sales, not the sellers who are upside down nor the REALTORS who are unfamiliar with or unwilling to bend to the way short sale transactions are typically handled.

Rule 3: BE PATIENT: We mean be prepared to be ‘seriously’ patient, like for a few months. Literally. Buying a home which is listed for a short sale can get you a great deal on a property, but you must be prepared to wait for an extended period of time (2-3 months is common). The lender has numerous things they must check and cross-check before they can approve a short sale. Watch for a future blog on “What is Taking Them So Long?” We’ll address the laundry list of things which must be checked before a short sale can be approved.

Rule 4: EXPECT A COUNTER: Four things you should understand from the beginning:

1. Your offer is likely to be set aside until the lender gathers the information they need to make a decision
2. Your offer is likely to be ‘joined’ by additional offers during this waiting period
3. The Lender is likely to present a COUNTER OFFER to the potential purchaser who they believe has the offer which will net them the most
4. That this COUNTER may not be presented to all potential buyers

Consequently, you should write the offer for the amount you are willing to pay since you can not be guaranteed a second opportunity to increase that amount. Short sale transactions are a real estate gamble; you’ve got to realize that going in and decide if you have the stomach for this kind of acquisition. If not, find a regular listing which will offer you the comfort of more traditional negotiating and timing.

It’s all in the game. All in the wonderful game that we know as: Short Sale.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

From the Desk Of..."Nothing from Nothing"

Nothing from Nothing Leaves Nothing

“And that ain’t nothing, believe you me” is a refrain of a popular song from my youth. Who knew they were talking about real estate commissions? In today’s tight market it behooves you to start with the end in mind. Literally. It would seem obvious that licensees would always do that since they’re self-employed, paid only via commissions. Unfortunately, keen observation signals that far too often REALTORS® focus on the accumulation of listings without focusing on the realistic possibility of a completed closing. They bought into the myth that whoever has the most listings is the winner of the trophy and therefore is most productive.

Something is Wrong With This Picture . . .

Can you imagine an agent who regularly carries an inventory of 25+ listings (average price $125,000) but is seriously struggling. Obviously, the agent has no problem convincing folks he can sell their home. The problem lies in failing at some other very basic issues which are likely to prevent someone from converting a listing into a “closed” transaction. Let’s consider the most likely culprits.

Silly Details

This will surely not be stepping on your toes to mention “silly” reasons why a listing is unlikely to result in a sale.

• The owner filed bankruptcy, two weeks ago
• The spouse never signed the listing contract
• The lender will be “short” and no one mentioned it
• The house is already scheduled for a sheriff’s sale
• The paperwork for a deed-in-lieu was mailed the day you had your listing appointment
• The “summons” was received two (2) days before they called you

Shame on YOU

In today’s market it is not intrusive to conduct a thorough analysis of the reasons why a potential seller chooses to sell at this junction—that just reflects market savvy. Further, it is a disservice to the potential client and to your agency/yourself to list property without addressing the most common reasons why real estate becomes “unavailable” for the completion of the transaction in today’s market. What a shame to have unearthed the proverbial needle in a haystack (a qualified, ready and able buyer) only to discover you don’t have anything to sell. If you are lucky—really lucky—this qualified buyer will be too busy to sue your client for “failure to perform,” with yours truly as a co-conspirator.

Price ‘em RIGHT…from the beginning

The operative word is RIGHT. The correct view is from a buyer’s prospective. Must I tell you I mean for today’s market, not the market THAT WAS—which is no more. If you’re not able to convince a potential seller of the appropriate listing price based on your BPO/CMA and supporting documents, are you a good enough salesperson to convince someone to buy it at the inflated price you listed it for? Think about it.

Is the owner committed?

I’m sorry, I didn’t mean “should the owner be committed” or perhaps, “the owner plans to get committed.” I mean, IS THE OWNER, TODAY committed to selling their home? Well, how can you tell? That’s easy. An owner who is committed to selling has some basic awareness of the market and will be receptive to your education/documentation of current value. They will already be working on getting their home ready for showings and quite willing to set a definite date when those preparations will be complete. A committed seller is not “testing the water.” They have concrete plans for moving. In other words, they’re an active participant in their real estate process, not your reluctant sidekick.

Ready for the debut?

Not you, the house. Too often, in their anxiety to seal the deal and tally another listing, agents list homes which are not only not ready for showings (clutter, minor cosmetic issues which need to be addressed, lack of curb appeal, etc) but whose owner has demonstrated a lack of commitment to making them ready. It’s such a simple practice to ask “How long will it take to get your home ready for showings?” (Notice, I did not say for listing). Then clearly say, “Call me when it is ready for showings. We can then do the paperwork needed for the listing agreement and I will take photos for marketing.” There, wasn’t that simple? Don’t list a home you are ashamed to have viewed. Day One. Dot. Period.

The Four Rules for Listing

The “rules” I encourage you to implement assume your relationship with your client is strong enough to have resolved any issues related to:

1. a. Appropriate market-based pricing
2. b. Acceptable condition
3. c. Provisions for showings
4. d. Possible impact of “undisclosed pertinent information"
5. e. Any “other” current realities

Rule #2—List at no more than 3-5% above the current market (short sale is an exception to this rule)

Rule #3—List only when the home is “camera ready”

Rule #4—List only AFTER the seller has demonstrated they are committed to selling

Closing = Commission Paid

Now for the first and most important rule. The FIRST rule for listing should be: Don’t list anything you don’t REALISTICALLY believe you can close. It was a good rule to live by when I started my real estate career in the early 90’s. This was not a company rule, but my personal standard in order to become a successful REALTOR®. My logic was that if I closed everything I listed, then folks would believe that I was a good REALTOR®. Such a novel idea. But it worked. My fall-thru rate with buyers was less than 5%, almost always because of inspections issues. My expired listings—less than 1%. Time on market—well below the average for the market then. I appreciate that times have changed. Nonetheless, it was an excellent idea then. I encourage you to consider adopting it as your personal mandate today. You’ll accept fewer listings, but if you close 90-95% of what you list, will you be better off in 2009 than you were in 2008? You do the assessment. It’s a business decision. Marketing listings which are not likely to sell is costly.

6% of Nothing is Nothing

One of the prime reasons I teach and write is because I recognized that the strategies which are being used by many agents are counterproductive and therefore, very frustrating. Handling foreclosed properties for Fannie Mae, after some well-meaning agent had tried to sell them—the traditional way—predictably resulting in foreclosure—I decided to teach agents how to better understand the lender/insurer’s position, and how to successfully structure a short sale. It works, IF YOU WORK IT.

Getting to the closing table is the ultimate goal for all real estate professionals. Strategies for posturing yourself, from the inception of the transaction, with the goal of getting to the closing is the cornerstone of the foreclosure related classes taught by HOM. The (FIS) certification is wholly focused on GETTING TO THE CLOSING TABLE.

Want to learn more?

Web: www.HomeOwnershipMatters.com.

Blog: http://www.HomeOnwershipMatters.blogspot.com/

Mildred Wilkins

President of Home Ownership Matters

Author of “Your Real Estate Advisor”

available at: www.DovePublishingHouse.com

Toll-free 1 (866) 507-5105

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more articles by Mildred at HOM's website.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

INtro #51: Buyer's Agent—A Different Game...Short Sale & REO Buyers

HOM INtro #51: Buyer's Agent—A Different Game...Short Sale & REO Buyers

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Copyright © 2009, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

From the Desk of..."REALTOR at the Crossroads"

You’re a

REALTOR at the Crossroads

This is not a time for ‘dabbling’ in real estate. If you’re not a BIG DOG or prepared to become one, you really must stay on the porch. If you’re a little ‘soft around the edges’ and cry at scary movies, now would be a good time to non-renew your license.

Challenging Times

We are hard pressed to remember a time which has been harder for the housing market, and consequently, for real estate professionals in the past 25-30 years. If you are still trying to decide whether or not to renew your license, then read on. I have been warning that we were headed for just this situation since 2002. Mostly, I have been laughed at for my trouble or asked “Are you serious?” I was serious and correct. Everybody else is adequately covering the challenges now that we are actually in the midst of them. I have chosen always to understand my environment and figure a way to become at peace with it. So, let’s fast forward to the best of times.

Best of Times

This is the best of times to seize the opportunities being presented by today’s challenging real estate market. If you have lived a few years past, say, 30, you know that inherent in all difficulties lies the potential for new opportunities. This really is the best of times to take stock of both your personal and professional lives and decide—AGAIN—what you want to become when you grow up. While traditional real estate sales, for the average REALTOR, have become difficult at best, YOU are not average. You decided to read this article hoping to find insight and perhaps direction since you recognize you are at a crossroads.

Today’s Reality

No matter what city or state you happen to call home the challenges facing real estate professionals today are remarkably similar. There are more properties available for sale, a somewhat (or perhaps extreme) smaller pool of traditional buyers, tighter guidelines for financing, more REOS and a multiplicity of factors pushing property values down. Did I describe your market pretty accurately? There are exceptions, of course, but your market is likely described above. Today’s reality. Your success depends very little on what is going on in your market. Instead, your success is tied to how you respond to the market and whether or not you position yourself to be one of the agents who not only survives---but thrives—during this turbulent market. A concentrated, committed, full-time effort will almost guarantee success.

Specialization in Expanding Fields

The successful real estate professional two years from now will be able to look back and tell you with clarity exactly when they stood at the crossroads and made a choice which took their career to a new level. Specialization in one of those areas which are expanding because of the downturn will allow you to become one of those future success stories.

What Might a Career Shift Look Like?

• REO sales person—representing lenders/servicers by selling bank owned property. ( I am a former Fannie-Mae Broker specialist.) Can you imagine the volume of listings I would have now if I still represented them?
• Trash-out Specialist—handling all the details needed to trash-out and prep homes which have been foreclosed
• Locksmith—again—working for lenders to re-key when properties are vacated prior to foreclosure and again after the sheriff’s sale for placement on the open market as an REO
• Reverse Mortgage Specialist—working for a company which sells reverse mortgages to seniors who have equity in their homes as a way to avoid foreclosure/enhance their lives
• Foreclosure Intervention Specialist—(FIS)–starting a business as a consultant to offer foreclosure intervention counseling/representation, especially in upper end markets/areas
• Investor—in rental property you expect to hold for the duration of this down economy
• Property Manager—for single or multi-family—WARNING—not a simple as saying you can.
• Short Sale Specialist—again-not as simple as saying you can. Agents who have learned to be proficient at the strategies for successfully completing a short sale will be in demand. You would have more business than you could handle—IF YOU KNEW the secrets to successful short sales.
• Default Counselor—not the same as a foreclosure intervention specialist at all. You would most likely work for a non-profit agency doing counseling or you might start your own firm
• Real Estate Attorney–who decides to represent consumers who are struggling with their mortgage payments. You would also receive referrals from REALTORS, default counselors, and foreclosure intervention specialist when legal help was needed—WHICH IS CONTINUALLY.
• Lawn Care Company—not very glamorous---but definitely a business with a strong demand. As more foreclosures occur lenders are increasingly under the gun to keep properties which they own maintained. They’d rather pay you than the city.
• Show Home Franchisee Owner—finding qualified tenants for upper end properties while they remain listed. It’s a different class of property management. Great income—thriving in some markets.
• Property Valuation—using professional BPO forms ( such as the Fannie Mae BPO long form) and skills which include making adjustments for individual components of the property. Your most likely employer: lenders and servicers. Additionally, I believe consumers would be willing to pay for fairly accurate assessment of their property’s current resale value in order to help with their difficult choices in this climate. (I’m sorry guys, the traditional BPO or CMA is not thorough enough for today’s market.)

Dare to Re-Define Yourself

Trust me, time is on your side. The current wave will be rolling for the next 5-7 years or more. Get ready for the next ‘stage’ of your real estate career. Since I entered real estate in 1993, I have gone from buyer’s agent for entry level homes to listing agent to Fannie Mae Broker-Specialist to becoming a national trainer on foreclosure issues. Life is about ‘stages.’ Get un-stuck, buckle up and hang on!!.

You’re a REALTOR at a crossroads; which path meshes with your skills and interests?

Observations From the Desk of Mildred Wilkins,
President and Founder of Home Ownership Matters, LLC.

© Copyright 2008, Home Ownership Matters, LLC. All rights reserved.
(FIS) is a registered trademark of Home Ownership Matters, LLC.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)