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Category: Ask the Broker (page 2 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.

July 24, 2007

Ask the Audience: How do you defend your own paycheck?

by

Suburban Phoenix Real Estate Broker

Author website

This came in as an Ask the Broker question:

Thanks for having this site.

We found the house we like and we made the offers and counter offers, finally getting to a place where we got stuck. The seller does not want to came down on her price and we cannot pay more. We are $20,000 apart.

What I would like is for all parties involved — the buyer, the seller and the two agents — to come to the table to make up the difference.

Have you heard of a situation like this?

Alas, I have.

I can be pretty free about using commission dollars to solve problems with transactions, but there are constraints. I will rebate every cent of an untoward commission or bonus, and I don’t hesitate to pay out of my own pocket to make problems go away.

But: My money is mine to do with as I choose.

I can address the problem posed by the question with a very simple analogy:

If your employer decided to buy a company car for his own use, would he be justified in asking you to kick in $1,000 toward the purchase price?

That clarifies that.

But take up the problem as a Realtor or lender: What would be the optimal response to an appeal like this?

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July 19, 2007

In Defense of Buyers’ Agents

by

Realtor, Associate Broker

Author website

This came into the comments section of this post yesterday, from Joshua Ferris:

What type of services do you expect a buyer’s agent to offer in order to create a “real value”?

Thank you, Joshua, for the set up! Timing couldn’t be better; there seems to be a confluence of events. Redfin has apparently duped a new round of investors (“Honest! It’s the last time I’ll ever need funding!” is the fourth great lie); Redfin is capitalizing on what seems to be an emerging anti-realtor trend; and I had more conversations with local realtors yesterday who are getting “I’ll only deal with the listing agent!” sign calls.

I wondered if there was anything that was helping drive it, so I just Googled “How to buy a house” and found this site:

“Real Estate Agent” Is Just Another Name For “Salesperson”
Don’t ever lose sight of that fact. Their only mission is to sell, sell, sell to YOU. Don’t ever let on that you are in a desperate situation, or that you need to sell a house fast to pay for emergency bills, or that you are in a desperate crunch to buy this house now, because you are being transferred into town this week. It’s simply none of their business and as far as they are concerned, you are not in a rush to buy a house.

Excellent. What good could possibly come from telling your agent how quickly you need to buy or sell?

HouseBuyingTips.com Buyers Warning
One of the biggest mistakes many home buyers make is assuming that their “buyers agent” is working for them. They could not be more wrong. Also, never let a real estate agent choose your attorney. You must choose your own attorney, not one with a cushy relationship to the salesperson who is trying to sell you a home.

Punctuation is oversold, and non sequiturs simply don’t deserve that negative reputation…

If you are buying a house instead of selling a house, you really don’t need a real estate agent.

When the Carnival of Praetorian Cranks Posing as Something They’re Not is launched, this guy — Jeff Ostroff — will win every week. He’s apparently Read more

June 13, 2007

Ask the Broker: What’s up with my APR, and why is it so different from my interest rate?!?

by

Mortgage Banker

Author website

Hot out of the broker oven mailbox today is this question:

I am in the process of refinancing. Can you please tell me what the APR should be for a $295,800 loan? The broker is charging 2% origination fee and 1.5 loan discount. The interest rate at 6.64. I’m not sure if it makes a difference but its a adjustable rate and balloon loan. After 2 years mortgage will go up.

The total settlement charges are $14,590.77. The truth-in-lending disclosure has an annual percentage rate of 10.634%. This doesn’t look right.

I questioned the broker and he said that rate is all the fees and payments that are in the loan. This is not my first time refinancing and I never saw it that high. Why is the difference so much?

Disclaimer: I am not privy to the reasons or motivations for this transaction; nor the particulars above and beyond the above question. Below are simply some general thoughts that stand out from the above inquiry. I could be completely off-base in any one of my assumptions.
I had to step away from the computer and take a lap before responding to this mailbag question. Before we get to the APR/rate discussion there is another point I want to highlight first:

(1) Paying discount points to achieve a lower rate when taking a short-term ARM is always a money-losing proposition. Because this is a short-term 2-year ARM loan you will never recoup the money you paid in points to get the lower interest rate (1.5 points or $4,437 in this instance). In order to simply break even on the money spent for the loan discount in the two years before your rate adjusts your monthly mortgage payment would need to be $185 less than it would be otherwise with out the discount points.

If we make a rough assumption that each point paid in discount reduces your interest rate by .5% (a reasonable assumption on a subprime 2-year ARM, might be a bit generous) then your interest rate with out paying the 1.5 loan discount points should be around 7.39. This makes Read more

May 16, 2007

Ask The Broker — Discrimination based on price range?

by

Real Estate Investments Broker

Author website

Can a prospective buyer be discriminated against because of the price range of home they are looking to purchase? For example I feel that an agent I recently visited would not help me because I was looking for a low-priced home. I am a young, single, first-time home buyer and basically just wanted a roof over my head to avoid paying rent. The agent flat out told me that I needed to spend more money. I have called and left messages for him and he has never returned my calls. I think he is avoiding me becuase he knows I will not spend a lot of money on a bigger home. Should I press the issue or is this just something I need to get over? Thanks.

This is an easy one.

This agent did you a great favor. It sounds like he doesn’t handle that price range. You want an agent who specializes in lower end homes, or better yet, first time buyers. There are many loans available just for first time buyers that most agents, (including me) don’t have a clue about. It’s not that I don’t know the answers for all of your questions. It’s more crucial than that. I don’t know the questions you don’t know to ask — much less their answers. And that’s not a position in which you want to find yourself.

Let’s reverse this situation. What if you had asked a first time buyer’s agent to find you a million dollar show place? Would you have felt discriminated against if they had turned you down? Here’s the principle — Don’t use a wrench when what the job requires is a hammer.

I’m an expert in real estate investment, yet I don’t know about every single kind of investment real estate. For instance, I’ve never known much about industrial property. If you came to me wanting that kind of investment, I’d immediately fess up, then refer you to someone who is a specialist in that kind of property.

Believe me, you don’t want an agent who needs to reinvent the wheel because he wouldn’t turn you down Read more

May 15, 2007

When To Buy? Now — Later — Never?

by

Real Estate Investments Broker

Author website

Last night Greg posted an Ask The Broker question — In your market, is it better to buy in eight months or 14 months? Aside from the arbitrary and limiting waiting periods, it’s an excellent and very timely question. It’s also a question my bride and I are tossing around these days.

We’re still living in my bachelor pad which is a very well located condo in a suburb of San Diego in what’s informally known as East County. It has plenty of room, is incredibly convenient, and has served us well. But we want to buy a detached home in the area. Our current floor plan was apparently designed by a sixth grade class project, and since my wife (in a former life) was a very successful interior designer, it’s time to end her suffering.

Deciding to buy a home in San Diego isn’t a choice made on a lark. A piece of mundane crud goes for half a million bucks. Also, we’re probably going to insist on a granny flat or room to build one, as my mom is closer to 80 than 70. We may actually end up with two extra flats as my mother-in-law is also approaching the time when she’ll need family close by. So our price range will fall somewhere around $700-1Mil — ouch! We’ve been spoiled by the relatively low monthly housing costs we’ve enjoyed for the last few years.

Adding to the cost of buying of course, will be the truckload of cash Queen of All That Is BawldGuy will require to make the new house our home. When you marry a designer you know this going in. Moving or adding walls, and even rearranging entire floor plans isn’t out of the question with her. I’m already practicing my “of course, honey” responses. 🙂 Since I couldn’t design my way out of a wet paper bag, this is guaranteed to be the correct approach.

Our market hasn’t been hit nearly as hard as Phoenix. I haven’t checked, but I can’t imagine we’re mirroring their market — only one of nine homes listed actually selling. And, also Read more

May 14, 2007

Ask the Broker: Buy now? Buy later?

by

Suburban Phoenix Real Estate Broker

Author website

This question concerns the Phoenix-area, but feel free to answer it for your own local market — just tell us where you are.

Which would be more attractive? The 8 month market or the 14 month?

I’m literally on the CUSP of being able to buy and with kids already transferring schools, the sooner the better in order to get some stability.

I’ve seen new home builders drop their prices pretty heavily or offer deep incentives. One of them has a home for around the 300k mark in Gilbert that’d be PERFECT. While I could make the payment now, I have been married to a house and that’s the worst type of one-way relationship. I don’t plan on doing it again anytime soon. Additionally, they just reduced prices 50k and are ALSO offering 20k in upgrades or a FREE Car/Truck (a Ford financed for 30 years is anything but free).

So with having settled on the fact renting the larger home I need and finishing another 6 month lease around 3/1/08 would put me at a greater financial advantage to tackle the home I have my eyes on, I question whether it’d be worth the higher payments for a shorter lease (as it’s on a home not an apartment), or if the market will be depressed enough to go the long haul at 12 months and spend more time preparing and saving.

I figured I’d shake my magic 8-blog (see what I did there? It’s a clever Monday!) and ask away. If you were advising a client on the buying side of life on how long to hold out if holding out was all they could do – Would you suggest holding on 8 months or 14?

Part of me says throwing money away on renting an additional 6 months is wasteful, the other part says that it’d allow me to save up for the stuff I’ll need to make the house a home. At a savings of around 500-600/month, that adds up to a few extra grand after 6 months.

The mention of a 40 year loan got me thinking more about affordability and financing. Read more

May 7, 2007

A questionable practice?

by

Mega-Producing Realtor

Author website

Christopher R. Dunn writes:

A questionable practice?It would appear that numerious RE firms here in the Bay are making it real_estate_book_sma practice to List, market with open houses, advertise properties at a below market number with no intentions of selling at that number.The listing broker will take offers and hold them until a later date, usually two weeks or so to generate “competitive” offers.

Are Real Estate Firms practicing this in other areas?

To my knowledge, not in our area. If it is as you describe it, I don’t see it as “questionable” but intentionally deceitful. It is in direct violation of the Realtor Code of Ethics (download a copy of the code here) Article 1 (treat all parties fairly), Article 2 (avoid exaggeration, misrepresentation, or concealment of pertinent facts) and Article 12 (shall be careful at all times to present a true picture in their advertising and representations to the public). It would also likely be actionable by the California Attorney General’s office, as well.

If some Realtors are doing this sort of thing I believe it should be stamped out and stamped out hard.

May 3, 2007

I’ll bring you a big basket of cash if you’ll let me sell your house for free

by

Mega-Producing Realtor

Author website

Chris writes:

I’m looking to get into real estate after i graduate in a couple of weeks but i have a couple of questions that i’m looking to get answered, appreciate your help.

If all real estate brokers in an area generally charge the same fee for selling a house, how do real estate agents compete with one another if they cannot vary their fees? Also is the real estate profession overcrowded in your judgment?

Yes, the industry is horribly overcrowded, there are way too many agents chasing too few deals for all of the agents to make a decent living. This has been a true statement for at least the past four decades. 13 out of 14 agents fail and leave the business within two years. bugAll real estate brokers do not charge the same fee. Some brokers charge 6 – 7% to list and sell a house and others charge half that amount, some companies charging a flat fee of $300 – $500 to list a house. There is now a company affiliated with Buy Side Realty who will list the house at ZERO. Correct. A FREE MLS listing. And when you buy a house through Buy Side, they will give you back 75% of the commission. These companies are already “national” unlike the endlessly commented upon Redfin, who only has offices in a few cities.

A company was started some years back called HomeGain that was initially based on the premise of agents blindly (they wouldn’t know who the seller was – but the seller would know who they were) offering to list a home for less. The agent who offered the lowest commission won the prize of getting to list that home. This company was started by Bradley Inman and he sold HomeGain for enough money (tens and tens of millions of dollars) so he can now devote as much of his life as he wants to working on getting agent’s commissions down.

Then, how DO agents compete with one another? If you are in the business and working on getting business, you somehow contact someone and let them know you are Read more

April 8, 2007

I Want To Be a Lister – The Listing Presentation

by

Mega-Producing Realtor

Author website

A couple of important questions:

Chris writes;

Here is a question, I have never been on a listing presentation, I have not yet taken a listing, and I’m a brand new agent. But I want to be an excellent lister, and I don’t care what amount of effort that takes.Where is a good place to start with a listing presentation? I have Tom Hopkins book, but is there a good up to date one online somewhere? IE “this is an ideal listing presentation from start to finish, these are all the points you need to hit”. I think if I get the bones, I can probably expand on it, change it a bit for me and make it work.The top agent in my city sold 150 houses last year. Figure an average house is $400k around here. She is the top dog, so that’s who I am aiming for lol!

__
and Scott Cowan writes;

Thank you for the reply. I am looking forward to seeing the videos if you are able to post them online.

I do have a request for a bit more detail about a topic. Currently on BloodhoundBlog you have posted that it is vital to have a really good listing presentation. Currently my listing presentation is nothing more than the research I have completed on the house and the area. I have some local and national statistics that I share. Much to my disappointment (although now that I have been doing much more reading not to my surprise) my success rate is perfect. A perfect 0 for……… Would you be willing to point me in the direction of resources for putting together the really good listing presentation that you have been talking about? I have been reading online and everyone says that theirs is the best etc. I am overwhelmed with the amount of fluff and hype that I am seeing.

Your advice that I have listened to and read has been the most practical of the information available online. I am curious what your thoughts are on a rock solid listing presentation.

Thanks again for being such a valuable resource to the Read more

April 3, 2007

Ask the Broker asks the audience: How best to invest an unexpected windfall

by

Suburban Phoenix Real Estate Broker

Author website

Another question requiring expertise far beyond a broker’s license. Fortunately we have two great investment writers, three off-the-charts lenders and a readership of very prosperous people. Here’s the problem:

I have come into a situation, and was wondering if you could give me your opinion. I have recently come into an inheritance of about $200-$250,000 from a family member who has passed away. I decided that the best use of this money is to invest in real estate. I have narrowed down my choices to four options.

  1. A foreclosed house which needs repairing, however it can be bought for past due mortgage payments and past due real estate taxes, legal fees, etc. for $200,000. The fair market value is about $300,000.
  2. A housing project which has HUD financing of $1,750,000 and a fair market value of $2,000,000. Rental is locked in for $150,000 per annum, plus certain adjustments. Expenses are the mortgage with interest at 8% and operating expenses of $25,000.
  3. A shopping center with tenant rentals on an escalating year-by-year basis. The center is currently 80% rented and receives $200,000 cash flow and operating expenses are $50,000. The seller wants $2,000,000 and he is willing to take back a second mortgage of $250,000. I feel like I can get a $1,500,000 mortgage from the bank at the current rate on a 20 year basis. The second mortgage will probabably be a 2% higher interest rate.
  4. A shopping center with tenants who are all NYSE companies. All the leases are triple net with rental income of $500,000 last year. Sales price is about $6,000,000 and I feel I can get a favorable mortgage from an insurance company at a good rate. If I would proceed with this option I would probably cooperate with friends to get around $1,000,000 and get a $5,000,000 bank loan. I feel the property will appreciate at 8-10% per year.

Who has a good answer for this?

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April 2, 2007

I want a LOT of money – would you tell me how to get it?

by

Mega-Producing Realtor

Author website

Late last night I received THIS from a form filled out on my website:

I read about Russell starting Realtor Training, I would like to know if he can set up an automated program for me to follow and use here in Victoria Bc. I sold 11 million dollars worth of real Estate in 2006, I would like to double that over the next 12 months or more. Cheers, hope to hear from you soon!

And tonight see this post from Greg, where the question is:

I would like to know if anyone has a great listing generation system that works, day in and day out. My goal is to gross $600,000 over the next 12 months. I know this is a big topic. I am keen to to see what you respond with.

Both questions are basically the same – how can I easily NET about 500k a year. Please send me the answer. Thanks!

Free MoneyThere are a number of things you can do to generate leads. The effective things require either your time or your money. For example, I use radio and TV advertising to generate lots of “come list me” calls. It is very expensive. Last year I paid over 600k just for my media ads. You can start with less – when I started, the first year on radio I paid about 20k. The next year about 40k. Geographic farms are a common way to generate leads. Some agents buy them from companies. Working one’s sphere of influence is another common lead generation method – contacting a “known database”. One way or the other you will spend time, money or both to generate leads.

To go big one must do one of these two things: prospect effectively or market yourself effectively. Pick one.

Do I plan to ever attempt to put together some sort of package of “steps” – kind of a one-size-fits-all to provide to other agents? No. You can get one here if you are interested in such useless crap. Is there a way to become really successful in real estate with a small amount of effort? It can look that way Read more

April 2, 2007

Ask the Broker asks the audience: What do you use for a listing system?

by

Suburban Phoenix Real Estate Broker

Author website

Another wide-open Ask the Broker question came in over the transom:

Very rewarding and refreshing to listen to Russell Shaw. Wow, I wish I lived nearby. I’d love to see Russ live in April. Having said that, I heard Russell say listing homes is my future. It really sank in.

I would like to know if anyone has a great listing generation system that works, day in and day out. My goal is to gross $600,000 over the next 12 months.

I know this is a big topic. I am keen to to see what you respond with.

I have no good answer to this — for now. What we are learning from Russell is that what we thought was a listing system is, in fact, a halfasstrophic mess. We’re rebuilding everything from the ground up, and we may have some good, market-tested answers to these questions in a few months. For today, what about you? Do you have any good advice to proffer to our financially ambitious questioner?

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March 31, 2007

Ask the Broker says: Ask the audience: Is now the time to jump into the housing market?

by

Suburban Phoenix Real Estate Broker

Author website

This came in as an “Ask the Broker” question, but it’s really a wide open pitch for any informed observer. (That would be you.)

So should second-home buyers buy now, or wait? Will lending rates go lower soon? Or is this the time to strike?

Have at it, if you like, but back it up with a reasoned argument. I have no idea where our interlocutor is located, so respond for your own market.

My own take: If you’re willing to buy aggressively and hold for at least three years — five would be better — this might be the ideal time to buy a turn-key home in the Phoenix area. Values could continue to slip over the short-run, but interest rates are unlikely to stay this low in the long-run. Waiting out the bottom on price could result in a worse buy overall, where hammering hard now on price while rates are still very low could put you in an excellent position to prosper when values start to rise again. Nota bene: Never invest money you can’t afford to lose.

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March 27, 2007

What Do I Want In a Loan Officer?

by

Mega-Producing Realtor

Author website

Todd Carpenter wrote:

Hey Greg,

Now that REMBEX is working the way I want it to, I’m resurrecting my other pet project. It’s an all free training web site for new loan officers. Details are here. http://blog.mariah.com/2007/03/open-source-mortgage-training-manual.html

I would really like to get a real estate agent’s perspective on what they think a new LO needs to know in reviewing the contract and purchase process. I know you are busy moving your web site and training your protege, but maybe you know of someone else who can write an article for the project if you don’t have time. Even a word about it on your blog would be appreciated. I’m accepting volunteers for the other sections as well.

BTW, I know you are a Mac guy. I just upgraded to a 24″ iMac and am self-learning to use Keynote & Garage Band to make training videos for some of the key topics. The finished product should be pretty cool (I hope)!


Thank You!


Todd Carpenter
mariah.com

First, a disclosure; I am not an expert in loans, lenders or what they “ought to know”. But I am very comfortable in answering the question I used for the title of this post: What Do I Want In a Loan Officer? I’m not looking for one just now, because I have one who perfectly fits the description I’m about to write. How did I get her? Almost by accident, one of my Buyer Agents, Therese – who was making the transition into being one of my Listing Agents – said she had several good experiences with Kathy Rhubottom with O’Dowd Mortgage. Several “good experiences” consisted of the loans closing when they were supposed to and here is the “big one”: she was only told things that happened to be true. In the almost three years we have done business with Kathy, every deal – with two exceptions – closed on time. Both of those exceptions were title company errors, not the lenders. When Kathy said a deal was a makable deal, guess what? It actually closed.

Do I think Kathy is remarkable in her knowledge? No. I didn’t even meet her Read more

March 23, 2007

Are You Hungry?

by

Mega-Producing Realtor

Author website

Lisa Nolan writes:

I have acquired a RE license, and am contemplating entering the industry as an agent, and wondering if there is published data
anywhere on what production levels/market shares each Real Estate company holds…. I know there are many, many other factors more
important than this to take into consideration, but am curious.Thanks for any help,Lisa

There are many local companies around the country (you don’t indicate what part of the country you live in) that enjoy a huge market share – but just in that area their office is located. There are also some regional companies that are quite dominant in their part of the United States. For example, Weichert and Crye-Leike are not well known across the country, but are very well known in the areas they
do business.

HungryA relatively small company in Ft. Collins, Colorado, The Group, has the highest average sales per agent, year after year, of any company in the industry. Last I knew, their average number of sales PER AGENT was about 55 deals per year. They have a waiting list to get in and charge a $10,000 (non-refundable) deposit just to join. Their 55 sales per year, per agent, is very high. Coldwell Banker, for example has about 11.5 average sales per year, per agent.

Some companies, Help-U-Sell, for example, don’t promote their individual agent’s stats, working to create a uniform experience for the consumer, regardless of which agent or which office they select.

The number one national company for sales per agent is Re/Max. I remember when they were proud of that number being 23 transactions per year. It got as high as 32 sales per year per agent. I don’t know what it is just now – but would guess it is in the high 20’s. Re/Max has the very best agent to agent referral network in the industry. At one time agents were joining Re/Max by the tens of thousands thinking that being with that company would guarantee them success. When Keller-Williams really started to take off in the agent growth department – they managed to recruit thousands and thousands of agents away from Re/Max – Read more

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