Real Estate Information

Commissionectomy 101

A Realtor is entitled to receive a commission if they provide a seller with a ready, willing, and able buyer. An agent will refund all, or part of that fee if a client finds a ready, willing, and able attorney who proves the agent misrepresented some facts in the transaction.

Recently a friend of mine represented a seller who wanted to sell his townhouse. The MLS information said the property qualified for conventional, FHA, & VA financing. The buyer submitted an FHA offer that was accepted and the property was placed in escrow. The buyer’s lender determined that these units no longer qualified for FHA financing.

Rather than choosing to secure conventional financing, the buyer contacted an attorney. Imagine how surprised the seller and the listing agent were to find that they were being sued for misrepresentation. A higher down payment and interest rate for 30 years was determined to be a monumental financial hardship for the buyer.

The seller and agent lost in court. The seller was tagged for a $15,000 judgment, and the agent wrote a check for his E&O deductable. Materials facts should be checked before they are entered in MLS to avoid commissionectomies.

I just listed a townhome and was told by a credible source(the seller) that her unit did not qualify for FHA financing. The MLS info reflected cash or conventional for financing options. Within a few days I received an FHA offer. The buyer’s agent checked and found that this complex was just placed on the FHA approved list two weeks ago. Oops.

Even seasoned agents (that sounds better than stupid), should research materials facts themselves and not rely on old MLS info or inaccurate or untruthful sellers.

‘If in doubt, check it out’, is a great maxim to avoid costly commissionectomies, client complaints, and legal black holes.

OMG – You had a license?

Is it only me that finds that sellers that had real estate licenses are difficult to deal with? Do ex-bus drivers ask to help drive the bus they are riding in? Do ex-waiters help bus tables when they go out to dinner?

Recently, I viewed a property that had expired after being on the market for 444 days. The local days-on-market was about 3 months. The seller spoke with me because I had shown the property to some buyer clients a few weeks earlier.

During our conversation, she mentioned she had a real estate license “back in the 70’s”. She was clueless why her property remained unsold, or why she hadn’t received any offers. She was also adamant that price or staging had nothing to do with her dilemma.

When I arrived at her home I was greeted by three large greyhounds that gave me a reason to take my slacks to the dry cleaners. They seemed to enjoy sniffing certain parts of my anatomy more than others. The owner said they were “friendly”.

My first impression was how her property could cause a stager to faint. Her small den had a large organ, and enough books to excite a librarian. Each room had an “accent wall” with colors that were popular during the Civil War. Powder blue, light purple, and a shade of pink that resembled monkey vomit.

Her home had a premium price but few, if any, upgrades. Of course, she knew the comps before I took them out of my manila folder. Of course, her home was comparable, even though they sold and hers was rejected by the market. She had a real estate license back in the 70’s!

As I left her property, I said a little prayer. Dear Lord, help me realize that professionals use professionals. Give me the wisdom to realize that you gave me two ears and one mouth. Let me use them in that proportion.

--
Paul Pastore
ReMax Infinity

Exploding Escrows

Having a deal fall out of escrow is one of the most discouraging events for a real estate agent. Hopefully, studying industry best practices, and learning vicariously thru the mistakes of others, can keep agents away from any mortal mistakes.

Currently, I have an escrow on life support. The property is in escrow for 70k. The preliminary title report shows that my seller has a 554k IRS tax lien against the property. At this time the IRS is not interested in a partial payment. The seller seemed surprised that this ‘popped-up’! The buyer is ready to look at other investment homes.

One agent in our office said she has a title company ‘peek’ at the title when she takes any listings. She also has the seller complete the property disclosure immediately and uploads it into the document section in the MLS property info. Both of these practices might have helped avoid this dilemma.

Another way to avoid errant escrows is to ask a seller if any room additions were properly permitted. I have a friend (OK it’s really my deal) who represented a seller who had a major room addition that was not permitted. The home inspector brought it to the buyer’s attention. He also mentioned the add-on was a hazard and prevented proper egress in the event of a fire. The buyer walked and received a deposit refund.

If in doubt, check it out is a helpful maxim. Is the area known for having termites? Pre-order a termite inspection. Does the roof look worn? Have it pre-inspected or obtain a 2 year roof certification.

In this ‘new normal’ economic environment deals are harder to produce. It is important for the listing agent to avoid potential pitfalls that may occur in escrow. The best way to get paid for every escrow is look for potential problems before they arise.

Staging Isn’t magic

Home staging is not a substitute for proper pricing. It is only one leg of the ‘home selling stool’.

Pricing, staging, and marketing all must be correct for a property to sell.

This week I viewed a property owned by a seller who thought he could fool ‘all of the people all of the time’ with home staging. He hired a local expert and a stager from California to ‘cutify’ his property. The seller felt he could overprice the house by 50k after spending a few grand on staging cosmetics.

The seller purchased the property about a year ago for 390k & rolled his costs into a VA loan. His balance is around 400k. The current market value is 375k. After costs he is about 50k under water. He could short sale the house, bring cash to closing, or ‘doll it up’ and ask 425k in an effort to break even. He foolishly chose the latter strategy.

A sage once said that you can put lipstick on a pig, but you still have a pig. An agent can stage an overpriced home, hold open houses every day, give out free hotdogs on the weekends, dress up in a clown suit and spin a sign on the nearest corner, have the Boy Scouts hand out flyers, have the 13 dogs that set the Guinness book of records jumping rope for the neighbors, have the Blue Angels do a fly-over, use the property for a charity Christmas boutique, offer a free petting zoo in the back yard, free car washes in the front yard by scantily clad cheerleaders, and have the home featured at half-time on Monday night football.

If the home is overpriced it still will not sell.

Home staging is to selling as red robes are to Catholic cardinals. They both look great.

Few people buy a book based on its dust jacket. Few home buyers overlook relevant comps because the home looks great and smells like vanilla extract.

Feedback is Fundamental

One of the duties of a listing agent is to obtain accurate and timely feedback for seller clients. Most sellers expect and appreciate this service. In my opinion, not providing feedback is a dereliction of an agent’s duties.

Last weekend I showed a buyer client a dozen properties. On Monday I received two email requests for feedback and one call from an assistant asking how my buyer felt about their listing. When I received her call I was in a hot, vacant house with buyers. The agent did not ask if this was a good time to talk. My response was abrupt, and not complimentary.

In my buyer’s opinion, her listing was overpriced. It had an ugly add-on Arizona room that was neither heated or cooled. In addition, it had ceramic tile in every room. The tile was different colors, sizes, and patterns. If she was looking for positive comments, I had none to share. She was so offended at my negative feedback that she called my broker to complain about my insensitivity.

Did this feedback reach her seller? I doubt it.

I am still surprised that nine agents did not call, or send email feedback forms. The two agents that did send forms with a half dozen scripted questions received timely feedback that was most likely forwarded to their clients.

As a listing agent myself, I use a service that detects if a keysafe is opened and then sends that showing agent a scripted feedback form. I receive responses form from most agents. The forms are sent to the sellers and they appreciate knowing the buyer’s thoughts.

Accurate showing feedback can be used as a point of differentiation on listing appointments. Showing a prospective seller a copy of the feedback form is a way of saying that you care about communication, details, and that you have systems to service their needs.

  COMMENTARY

This metric dropped to 100 days in July, a low not seen since July 2010. months DOM has fluctuated between 90 and 116, with an average of 101 For the last 24

DISTRESSED SALE

Distressed sales are a combination of lender owned and short sales and have dominatedthe total sales since well before STAT began to track them. Distressed sales (5,595) forJuly accounted for 66.7% of total sales, right in line with the previous twelve month averageof 67.13%. July short sales (1,981) dropped 34% from June’s 3,002. The July figure represents 23.6% of total sales. Distressed sales continue to dominate the total sales landscape although with the promise of an end as the foreclosures pending continue to dwindle.

AVERAGE DAYS ON MARKET

A recap of STAT’s good news this month focuses on the six day drop in days on market, continued ebb in the new listing flow, decline in the total inventory pool and the steep, steady downward trajectory of foreclosures pending, all supportive of the coming recovery. Disappointing, yet no surprise, is the state of Valley pricing which remains singularly lackluster. The ARMLS PPI predictions forecast more of the same for the next ninetdays, with average pricing in the $152,800 to $134,900 range and median pricing hovering in the $110,000 to $98,000 range. At the recent REAL ESATE FORWARD event, sponsored by ARMLS and the Phoenix Business Journal, panelist Michael Orr, Founder and President of The Cromford Report, perhaps said it best: "Pricing right now is like driving across Kansas and trying to find the lowest point."

Looking around the country it is not hard to find cities whose median prices actually make theValley’s look good. A recent CNN Money report listed cities with low median prices, such Lancing Michigan ($64,400), Toledo, Ohio ($64,900), South Bend, Indiana ($68,700), Akron, Ohio($74,900), Ocala, Florida ($75,400), Dayton, Ohio ($78,000), Cumberland, Maryland ($80,700),Grand Rapids, Michigan ($81,100) and Decatur, Illinois ($81,300)

1 , reminding us that our pricing dilemma could look worse.

STAT has reported for many months that jobs are the key to recovery. Dr. Ted Jones, Chief Economist for Stewart Title Guaranty Company, provided the national perspective at REAL ESTATE FORWARD. He reported that the label "a jobless recovery" attached to the current economy is an oxymoron. Jones reasoned that without jobs there can be no recovery. The Valley lost 220,000 jobs since July 2007 and gained only 5,000 in May. 2 At this pace, recovery is 4-5 years off, if the population remains at 2011 levels. Jones reported that we need 1.25-1.5 jobs per housing unit to return to normal.

ARMLS is now tracking weekly Valley new job postings on the three major career websites, Career.com, Monster.com, and Jobing.com. A graph of the postings is available each Saturdaymorning in its new publication, ARMLS REWIND, a weekly recap of news and emails from the preceding week. Thi metric will serve as a barometer to anticipate job growth.

Other panelists at REAL ESTATE FORWARD counseled that now is not the time to buy just one house, but rather two or three. The current affordability of the Valley’s housing market is unprecedented, and for those with the cash and the credit to act, the investment is sound and bound to pay off in the future. For now many factors are affecting jobs over which we have no control, e.g., oil prices, acts of God, general business confidence, etc. All panelists predicted2013-2014 when asked when they expected the Valley to recover. We can hardly wait!

1Statisticshttp://money.cnn.com/galleries/2011/real_estate/1105/gallery.cheapest_housing_markets/

2Bureau of Labor 

 Be Prepared...

The Boy Scout motto is ‘Be Prepared’. That’s a great maxim for Realtors, speakers, and Homo Sapiens in general.

When I began my real estate career 34 years ago, my trainer told the class that if it took a half day to prepare for a listing presentation, “Do it”. He smiled and suggested that we had nothing more important to do.

Recently, a friend of mine  gave a speech at Toastmasters. He felt he could ‘wing it’ without proper preparation. The speech bombed. My friend learned the ‘Five P’s: proper preparation prevents poor performance’.

Some agents today research their clients on social media sites such as Facebook and Linkedin prior to their presentation. Imagine how impressed a prospective client would be if you mentioned a few personal tidbits garnered from these sites. Being prepared shows that you care.

Be prepared financially. A Realtor friend of mine has a substantial federal tax lien since he chose to neglect paying his timely taxes. Warren Buffet said, “When the tide goes out, you can tell who is swimming in the nude”.

Be prepared physically. Do you have a little extra time on your hands? Review that New Year’s resolution to drop some weight. Remember people should look more like apples than pears.

Be prepared mentally. Join a brainstorming group. Realize that most market leaders are great readers. Join a Toastmaster club (www.toastmasters.org) to learn how to overcome the fear of public speaking.

Be prepared relationally. Referral business comes from building deeper relationships. Doing more deals is a byproduct of those bonds. Don’t eat lunch alone. Prepare to prospect daily.

Be prepared to refocus on a new niche. There are riches in some niches. Other niches like old oil wells no longer provide sufficient revenues. The only difference between a man and a mouse is a mouse will stop running in a maze if the cheese is removed.