There’s always something to howl about.

Category: Ask the Broker (page 1 of 6)

This one is easy… posts get this category if they respond to a question posed using the Ask The Broker button. Only contributors to BloodhoundBlog who are brokers should ever post an article that uses this category. If the question pertains to financing, Brian would be included among this group. Of course, those of us who are not brokers can always comment on these posts.

This Realtor found his buyer a property with no multiple offers

Are you representing buyers right now? It’s hard…REALLY hard right now. You show 8-10 homes on the weekend, your buyers get excited about one of those homes, you make an offer on Sunday night, a seller multiple counter-offer comes out Monday night, your buyer offers a price which is above their comfort zone on Tuesday, and they find out Wednesday that they didn’t get the home.
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Rinse and repeat. For weeks.
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Maybe the buyers get more aggressive and ultimately get an offer accepted but often, they just give up and say “it’s too hard right now”. Even worse, YOU give up.
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Realtor Cameron Hodge is one of my favorite new agents. He is licensed in both CA And FL and he hustles hard. I often finance his buyers and we were working with a zero-down VA buyer. He showed the buyers homes for three weeks, made 3-4 offers, and lost out.

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The buyer gave up but Cameron didn’t give up on him.
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Cameron drove the neighborhoods looking for FSBO signs…and he found one.. right around the corner from a home they just lost to a higher bidder. Cameron banged on the door, spoke with the seller, scheduled a buyer tour…and tied the home up, with an accepted offer, a day BEFORE the buyer toured the home.
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Right before the offer was accepted, another offer came in but Cameron asked the seller how his buyer could win the deal. He discovered that the seller didn’t want to perform what amounted to a couple thousand dollar repair. The buyer assumed that responsibility and entered escrow.
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Debra and I funded the loan for this buyer. The house appraised HIGHER than the contract price, the repair wasn’t required by the appraiser (but still needs to be done), and the transaction closed about two weeks ago.
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Don’t believe me. Let Cameron tell you all about it in this video (starts at 2:55 and ends at 10:00)
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If you subscribe to my weekly emails, you have heard how worried I am about the future of real estate brokerage, I implored you to shift your efforts to listings. To do that, you are going to have to talk Read more

Ask the Broker: Are buyers really willing to overpay in this market?

I have Arizona’s Unobtainium: An unpublicized home for sale.

I’m always happy to brag about my listing prowess, and I could not be more delighted to have gotten this question in yesterday’s email. But: Even so: This is how I sell homes faster for more money.

So: A client and I are working out the details for a home that will list on October 8th, and he asked the Ask the Broker question: “Are buyers really willing to overpay in this market?”

In suburban Phoenix? Only the ones who want to buy houses. We’ve been strong since 2014 and before, very strong this year before the pandemic, strong throughout – and all the while we are benefitting hugely from the exodus from other states.

This was my answer to my investor client:

Almost everything I have sold in the past five years has sold with multiple offers, most over list, many for cash. My last listing sold the day before it was to go into the MLS, so that’s not a fair test. My last lease had many applications and the winners paid the full year’s rent in advance.

Things will change in the time we have to wait, but we still should have strong demand. We will have to appraise for financed offers, but if we get lucky, we’ll get cash buyers or waived appraisal contingencies. Not all buyers are equal in their appeal, but the poorly-qualified offers come in high, which is useful for torquing the better-qualified players.

We list on Thursday morning, just after midnight, to capitalize on the search-bot instigated weekend showings. I disclose the state of play on all offers in the private remarks in the listings, so agents always know where they stand. We want the highest/safest/soonest closing, but among highly-comparable well-qualified offers, we want to know who wants it more.

Like this, just explicit, transparent arm-twisting that only the agents can see:

Available, go and show. Priced to market. Priced to move. Seller to review offers Monday night. The state of play on offers will be documented here, as they come in. Don’t dawdle: This home should sell fast. Read more

Ask the Broker: Has going FSBO lost its fizz?

This came in over the transom. I’m not answering the whole question. To say the truth, I feel as if I’m being shopped with every conceivable infraction in the HUD handbook. So, you, too, please do also exercise restraint on the subject of commissions. For all of me, the FSBO question is more interesting, anyway.

From my interlocutor:

We are selling our home in a very upscale part of Atlanta. We want to do it “by owner” using one of several services advertised on line. Who pays the buyer’s agent and what percentage? We’ve been told its negotiable but too little and no one will show it. The home will sell in the $400,000 range if that makes a difference.

I start here: I want to know more about “one of several services advertised on line.”

I don’t know the real estate market in Atlanta, but this strikes me as being a very poor time to sell without the MLS. If the “services advertised” are limited service MLS listings — which is as far as anyone should go, in my opinion, down the “by owner” road — then those listing agents can address the commission questions.

The seller will definitely be paying the buyer’s agent, of course: If you’re not paying for the product, you are the product — an idea that never seems to occur to home buyers.

But I think it would be a huge marketing disadvantage to forego the MLS. In the age of the internet, an MLS listing is more valuable than ever before. (I think this has come up lately in the Dipshit Broker News, but I stopped following that crap years ago.)

But even more than that, I think the right full-service listing agent can more than repay his marginal cost. The house is unlikely to attract a lot of attention if it is not listed in the MLS system, but, even then, if it is not marketed to its fullest advantage, it will sell more slowly and for less money than it could have.

My take is that most listing agents aren’t worth a damn, but the right agent will bring home Read more

Is This Normal? (What Seattle Real Estate Agents Earn)

We’ve spent plenty of time trying to figure out what’s fair to pay Redfin agents. As part of that exercise, we analyzed the gross commissions for all Seattle-area (King County, to be precise) agents who closed at least one transaction over the past year (May 12, 2009 to May 11, 2010). The data surprised us, so much so that we thought we’d ask this community if we’re making any obvious mistakes.

We sorted the agents by gross commission, assigning percentiles to each. When we didn’t know the commission on a deal, we assumed it was high: 3% for each side.

Agents at the 50th percentile of pay earned $29,820 in gross commissions. Agents at the 75th percentile earned $75,018. You don’t hit $100K in commissions until the 82nd percentile. Then we graphed the data, showing the gross commissions on the vertical axis, and the percentile of the agent earning those gross commissions on the horizontal axis. The result was a hockey stick:

But then we reasoned that a lot of part-timers are closing one or two deals on the side while working another job; so we excluded all the folks who earned less than $25K in gross commissions. This shifted the graph to the right a bit, but otherwise we still saw a very small number of agents earning a huge proportion of the total commissions in a market:

Then we asked ourselves how much money a good agent — say, someone earning $100,000 in gross commissions — has to shell out in costs each year:

Type of Expense Traditional Agent, Annual Costs
Brokerage fee $10,000
Health insurance $10,500
Marketing $10,000
Social Security, Medicare Taxes $6,500
Transportation $3,600
Cell service $1,200
Equipment $1,000
Dues, education $783
IT $1,000
Total $44,583

All told, the data left us scratching our heads. In a fairly wealthy market where sales volume has been increasing, a good agent — someone among the top 15% of his peers — is probably netting less than $60,000 per year. Does that sound right?

What drives your fear of flying solo?

airplane wing & fluffy white clouds on a beautiful blue dayIn my endless quest to dispel the many myths surrounding what it takes to thrive as an independent broker, I’ve compiled a list of the top ten ways agents deceive themselves into thinking that they can’t – or shouldn’t – set up shop on their own.

1. Creating a “sense of community”

Unless you’re actively recruiting, the last thing you probably need to be doing is hanging out at an office chit-chatting with other agents. Sure there’s endless entertainment and comic relief swapping horror stories and real estate tips and yes, you’re building rapport with other agents that could help a future deal go more smoothly than otherwise. But let’s face it, ultimately you’re just wasting time. If you need to create a sense of community, being active in your local community is a far better, more authentic, alternative. Volunteer for Habitat for Humanity or another cause you have a passion for. Create a true sense of belonging while building a meaningful network of contacts outside of – but related to – real estate. If you want contact with other agents use social networking sites like Twitter, Facebook, LinkedIn, and ActiveRain to interface with agents outside your market. You may even find you feel freer to share with those who aren’t your direct competition and with whom you may wind up being able to refer business to in the future.

2. Access to real estate expertise

Early in my career I did several transactions involving options to sell that only one broker in my company knew how to handle. Since there is an endless number of ways that transactions can evolve, there are many experienced, competent brokers who don’t know or who don’t have all the answers. That’s one of the most attractive things about real estate, in my opinion. Never a dull moment. Granted, I don’t advise anyone to go out on their own until they have a critical mass of transactions under their belt. For me personally I felt that number was about 100 transactions (five years) but your mileage may vary. I am always shocked when people with six months or a Read more

What’s the best way to use ALT Tags on a web site?

I usually use a dozen or more photos for EACH neighborhood, and want to include neighborhood name in each Alt Tag:

For Instance: Berkeley 4th St “what it is”

Berkeley 4th St Spenger’s

Berkeley 4th St Peets Coffee

Berkeley 4th St Amtrak Station

Will the repetition of “Berkeley 4th St.. ” in the beginning (or end) of the Alt Tag be considered keyword spamming if EACH of the 12 photos on that web page has an Alt Tag starting (or ending) with the same expression?

Ira

The Resistance Is Where The Action Is: Do what Others Don’t.

So I’m designated the ‘cold calling guy,’ on BHB.   Fine fine fine.  Also cool that Jessica Horton said that she’ll always be calling her 4,000 past contacts.   That’s cool.  But I want my database to be about 50 people that I do loads of stuff work for and with.  The 50 best people.   To get there, there has to be planned churn.  I want to continuously improve the kind of customer I have.   Not till my client list includes Warren, Bill, Steve, Rupert…will I stop.   If I was a Realtor®, I’d not stop until EVERY bank CEO, hedge fund manager, and millionaire asked me to list some houses.

I at least admit that I’m here to sell you something.   Openly.  It’s been called the ‘implied accusation,’ here before.  I’m friendly, but I’m not yet your friend.  I tell you why I’m calling in 2 seconds.  (Oh, how many of those’ how are you doing today,’ calls have you had…)  More honest than beating around the bush, and more pleasant for both me and you.  I don’t drop hints, I’m here to help, and I’ll need to be paid for it. And I’ll help, and you’ll be happy.  It kind of sucks when you know someone wants to sell you but doesn’t have the balls to ask you.

Since my last post on Twitter, my account has nearly doubled in followers, and I’ll be at 1,000 followers sometime this week.  (Follow me at @genuinechris ).   I’ve limited myself to calling 10 people a day that are new followers because I can’t connect to everyone…but I’m calling…it’s fun.   I am checking out twitterhawk to do it more, and yes, I’m throwing folks in Heap…when I like ’em.

The reason that people don’t call more, is mostly that they are cowards.   There is magic in doing what others won’t. Almost all the time, if you can summon whatever it takes to do that, you’re going to separate from the pack.  Or herd, since we’re all pack animals.    Any place where people resist, there’s probably money to be made.  Something noone wants to do?  Something mentally hard?  Read more

Where Do You Draw the Line?

Two questions for my colleagues in real estate!

#1: How much information about yourself do you share with prospective clients? I have to ask only because Redfin has lately been working with clients who want us to publish detailed statistics on each agent, and have wondered how far we should go. Today, we publish each transaction and, if the client has responded to our survey,  the agent’s rating on that transaction.

But especially in our bulletin boards — why doesn’t Bloodhound have online discussions (it could be a great consumer resource)? — folks ask detailed questions about our business model. They want to make sure our agents aren’t too busy, our houses sell for a good price, our files are locked, our clients are happy, our lawyers are idle, our — dozens of questions! The questions have been pretty good so we have tried to answer them all, but I wonder sometimes if we’re setting a precedent that will be hard to keep up.

As the general counsel at my last job used to say in answer to almost any question (Am I going to get fired? or where’s the bathroom?): “Answering that question now would obligate me to answer it in the future…” So, when someone unknown to you starts asking plenty of good questions, where do you draw the line?

#2: how do you protect the safety of an agent visiting a prospective client in a home the client wants to sell? We had our annual company meeting Friday, and this was one question we had to defer until we could consult others. Safety has always been a concern in real estate, but since prospective clients only communicate with us online before asking for an in-home consultation, it seems like the usual precautions may not be enough.

Any help would be much appreciated!

Project Bloodhound – Advice Needed

I figured we haven’t had a Project Bloodhound post in a while and I can use some advice, so I thought I’d throw it up for discussion. Here’s the scenario first and then, after that, I’ll throw out my questions:

I’ve been asked to give a presentation to the board of Directors for the local board of Realtors next week Tuesday on the state of the mortgage market. The person who asked me is one of the owners of a local real estate firm and he’s been reading my Mortgage Market Week in Review for a long time. Without sounding like I’m patting myself on the back, I would have no problem putting together a 20 to 30 minute presentation on what’s happening in the mortgage market. But Greg Swan has taught me that that’s not good enough.

Using Greg’s analogy, I want to set the bar so high that my competition can’t compete. I want to set the bar so high that all of the members of the board (or at least most of them) go back to their firms and tells their agents that they need to at least talk to that “Vanderwell guy” because he’s where it’s at.

So, here are my questions (for those of you who are real estate agents, especially):
1. If you were going to be at the presentation what would you like to hear?
2. Is there anything that a mortgage lender can say about today’s market that will help you do your job better?
3. What else should I do or attempt to do in the 30 minutes that I’ll have?
4. What should I avoid doing?  I’ve already learned (or relearned from Greg and the Gang) that I need to make something  like this about the industry and my knowledge of it, not about me or my bank.   So, if you were reading this and thinking that, we’re on the same page.

Thank you in advance for being willing to share the collective wisdom of the Bloodhound Gang. I’ll do another post and report back in afterwards as Read more

Unchained Speakers, Ribak and Brady, on HomeGain “Ask The Experts”

Mitch Ribak spoke to the Barrys on Real Estate Radio USA last Friday.  Mitch started as an agent in 2001, opened Tropical Realty in 2005, and has grown his business to close 180 transactions, during the first six months of 2008,  in a down real estate market.

Mitch looks for newer real estate agents, who are personable, with a strong work ethic for his team.  He plugs them into his 100mphmarketing software after driving prospective buyers to his website from various pay-per-click campaigns. 100% of his buyer leads come from the internet (his referrals come from original internet leads).

Mitch will be opening membership in the E-Homes Realty Network later this week. What is the eHomes Realty Network?

Very simply, it’s a membership that gives independent Real Estate Brokerages the ability to have the same tools and training that the Big Franchises have for one very low monthly membership fee.  It’s your Franchise without a Franchise!

We started eHomes Realty Network after realizing that most Independent Brokers don’t have the resources, the knowledge or the time to test and determine which products will work best for their companies. It has also become clear that most Independents don’t have any formal training programs for their Agents.

If this sounds like an “Unchained” idea, it is. Mitch is offering the national exposure, training, and masterminding, to independent agents (and brokers) for forty bucks a month.  He has plans for an updated e-designation for network members.  This is what Sean Purcell calls “disbrokeration” at its finest.

Tomorrow (Tuesday), Mitch and I will be hosted by Home Gain on their first “Ask the Experts” segment at 10:00 AM (PDT).  There will be over 250 real estate professionals attending the webinar.  There is no charge for the webinar and you can register here.  I’ll be talking about mortgage financing but Mitch will talk about how to drive traffic to your website.

PS:  If you’re wondering why Mitch calls his software 100mphmarketing, you gotta hear him talkListening to Mitch talk about internet marketing is like trying to take a sip from a fire hydrant; he gives THAT much good information.  Bring a pen Read more

Save a House, Ride a REALTOR®

(If you are not a country music fan, you may have a serious character flaw, but that is the subject of another post on another Blog.  For now, here is a video that will help you “get” the title of this post.)

Save a Horse, Ride a Cowboy

Across the nation, in most markets, we not only have too many listings, we also have too many overpriced listings.  It is true in Charlottesville; it’s true in Atlanta, Austin, and Atlantic City.  I know it is true even without looking at the local statistics for all these markets because “too many listings” and “too many overpriced listings” goes hand in hand.  The basic law of economics – supply and demand – dictates that prices will adjust downward when supply is too high. 

Following that logic, what we need is a good old fashion INVENTORY REDUCTION SALE!  Can you picture this ad as part of the NAR public awareness campaign?

reduction“Hi, I’m Charles McMillan, President-elect of the National Association of REALTORS® and I’m here to announce an across the board 30% reduction in home prices.  That’s right, this is the REALTOR® Spring Spectacular event of a lifetime.  Buy before July 1st and save BIG on any home in any market.”

Okay, that’s not going to happen, nor could it.  The real estate market is not like the market for toilet paper at Wal-Mart.  In real estate, we have something like five million owners (sellers) of the “company” that would have to approve an across the board price reduction.  That’s a lot of decision makers even by Wal-Marts standards.

Some sellers have figured out the economics of the current market and agreed to price their home correctly.  Guess what?  Those are the homes that are selling.  In the CAAR MLS, homes that sold in March sold after and average of 130 days on the market (DOM).  That’s not a particularly good number, but it beats the 149 days (and counting) that the current active inventory is averaging for DOM.  In addition, a closer look at the numbers will show that many of the homes that sold in March, sold quickly; Read more

A Deficiency Judgement? In Arizona? Not Likely.

Hello again!

Have clients asking you about short sales? I know I certainly do! In fact, it’s become a big part of my business. In fact, I am conducting short sale negotiations for 3 different REALTORS, as well as 5 different clients. Unfortunately, a lot of questions have arisen lately about Arizona’s Deficiency Statutes regarding foreclosure. I say “unfortunately” because I feel somewhat less than qualified to definitively answer these questions. Greater legal minds than mine (and mine is decidedly NOT legal) will be required to put the issue to rest. I will, in spite of the danger of blatantly misrepresenting the facts, case law, and statutes, attempt to answer one (NON-) simple question:

“If I do a short sale, or my property is taken from me by foreclosure, can the bank ‘come after me’ for the difference between what the property eventually sells for, and what I owe them, including sale costs, legal fees, etc?”

First, let me point the reader in the general direction of actual legal minds on this issue. Here is a rather esoteric treatise on the subject of getting sued for a deficiency judgement. Very good read, and fairly definitive on the issue.

Here is another article, that is more user-friendly on the same subject. Now, because I have a public education, and am somewhat literate, I will attempt to provide a synopsis of the above:

In Arizona, there are two types of “notes” given for real property: a “Deed of Trust” or a “Mortgage”. Despite the common parlance of the term “mortgage,” most people in most states do not actually have Mortgages. They have Deeds of Trust. I won’t go into the differences here, but suffice to say that a Deed of Trust has three parties to the agreement, and an actual Mortgage has only two. Actual mortgages are very uncommon in most states.

Now, the remedy of a lender for a home in default depends on what type of note was used to secure the property. If there is a true mortgage in place, the lender must sue in civil court in a process known as “judicial foreclosure.” The particulars of a Read more

Ask the Broker: How can the seller paying the buyer’s broker’s commission be fair to the seller?

Here’s a truly fascinating question from an agent working in Nassau County, Long Island, New York. The idea of buyer brokerage is just being introduced there, and our interlocutor is understandably mystified:

I am a bit confused, to say the very least.

If I write up a listing contract with a seller, traditionally, when offering compensation to a sub-agent that agent was working in the best interest of the seller as well — working to get the seller the best price and terms.

However, If we are now offering compensation to a Buyer Broker, we know that the other agent is going to be representing the interests of the Buyer — working to get the price as low as possible.

Why would a seller agree to compensate the Buyer Broker for any part of the commission?

Where traditionally the sub-agent would negotiate the best possible price for the seller. It seems to me we are telling the seller to pay a party who is going to negotiate against their favor? Isn’t this unethical?

So far, to my knowledge, there has been one actual rigorous argument against divorcing the commissions. We do what we do for practical reasons, and I have offered practical solutions to these problems, but, so far, no one has been able to defend seller-paid commissions as a matter of equitable rectitude to both principals. If I’m wrong about this, cite the link to the argument.

Meanwhile, our interlocutor makes defending seller-paid commissions that much more difficult. I don’t think there is any way to dispute the argument that buyer brokerage, as compared with sub-agency, induces sellers to act against their own interests — even as the seller’s hands on the purse-strings provides incentives for buyer’s agents to betray their clients.

Does anyone have any thoughtful answers to these questions?

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I Want My Half

An email I received:

Dear Russell;

How many years have you been in Real Estate here in the valley? (I know it has been a long time)

We were going to build a custom home for resale in Circle G Ranches Silvercreek, which is in Gilbert. We had a lot partner that owned the lot and would subordinate it to us to get the construction loan. When the project was completed and sold, all debts would be paid and the profits would be split 50/50.

The deal did not work out. The real estate market (as you are very aware) has softened. The lot she bought in March 2006 for $485,000.00 has now appraised for $430,000.00. The lot owner feels she has suffered a loss on the lot and wants us to split the $55,000.00 loss, yet she will keep the lot and in the future either sell the lot or build a home on it.

What do you think? We think she hasn’t suffered a loss until the lot is sold and she officially suffers a loss.

Thank you for your time.

half-halfThis is my 30th year in the real estate business. I started with John Hall & Associates early in the year in 1978. Now for the far more important question, has your lot investor suffered a real loss. It depends on how you look at it. Is the “loss” real to her? I think that answer is yes. Is it real to me? Not so much.

Have prices dropped since March of 2006? Yes, absolutely. Is that lot now worth less? Maybe. But if we look at who appraisals are for we may get better insight on this issue. Appraisals are for the lender or necessary to show some other party the “true value”. They are not required by the buyer or seller. Oddly, issues like the buyer’s FICO score can be a factor in determining the appraisal amount – so – no disrespect to appraisers – but I’m not very interested in what an appraiser thinks the value is, unless that appraiser is going to buy it. There are various rules that appraisers must follow Read more

Ask the Broker- Did I Invest in a Sub-Prime Mortgage?

Scott asks:

How can you tell if you have a sub-prime mortgage bond in a portfolio?

Scott, I’m taking a stab at this. I haven’t sold securities in 14 years. Mortgage-backed securities, in the early 90s, were mostly Ginnie Mae pass-through certificates or Agency-issued pass-throughs and collateralized mortgage obligations (CMOs). There were a few CMOs, issued by non-agency issuers, that may have contained a non-prime loan or two to “juice the yield”. Collateralized Debt Obligations, generally devoid of whole loan mortgages, may have been infiltrated these past few years.

How about this, Scott? I can’t say IF you have a sub prime loan in your portfolio. I can say that sub prime loans won’t be collateralizing GNMA, FNMA, or FHLMC issues. If you own an instrument comprised of primarily these issues, you should be in the clear.

Michael, your more current knowledge and experience might be more precise.