The Life of a Realtor, Part 2

So, a while ago I wrote Part 1 about the life of  Realtor.  Time to write the sequel....

I had a good, steady job before I decided to get into real estate (read Rich Dad, Poor Dad if you want some insight on this).  But, for some reason,  real estate always intrigued me.  However, I come from a long line of "play-it-safers" when it comes to career choices and the like.  When I told my parents I was going to go into real estate back in 1995 they were a bit concerned.  My degree had nothing to do with anything even remotely related to real estate (at least it didn't appear that it did) and all my family saw was "risk."  Frankly, I wasn't too sure myself.  I've never been a huge risk-taker, either.  And diving into something that I had no experience in and working for 100% commission was, I admit, a bit scary.  Not only that, but the company I went to work for was brand new and neither the company, nor I, had much of a data base or a "circle of friends and family" to work with. But off I went, with my license and the kind of optimism that risk-takers have been known for.

They say police work is "hours of  absolute boredom punctuated by a few moments of sheer terror."  Real estate is kind-of like that.  I spend a lot of time just managing things, doing the day-to-day mundane things and then all of the sudden I get a call or an e-mail from a prospective home buyer.  Or one of my clients decides to make an offer on a home.  Granted, I'm not actually "terrified" of this kind of activity, but it does get things moving on an otherwise routine day.  And then, somebody wants to see a house, another client wants to make an offer, and a new prospect want to meet with me...all on the same day at the same time.  That's when things start getting exciting.  "Time management" takes on an entirely new meaning at that point.

I mentioned in Part 1 that Realtors have to wear a lot of hats.  I work with several clients at any given time.  It's important that I keep my documentation with my clients physically separate, but I also have to keep my clients separated mentally and emotionally from other things that are going on.  What do I mean by that?  Well, mentally, I sometimes get a conversation confused between clients.  And they'll hear me say "Oh, wait, that was my other client...."  Myself and my clients often have the same discussions and I can't always remember who I had that last discussion with.  I also have certain things that always come up when viewing houses but I sometimes forget if "WE saw that one house that had that thing" or if that was another client I was with....and "did I already tell you about radon, stucco issues, polybutylene plumbing, how to brace a foundation, how to treat for termites, roof venting issues" etc., etc., etc.  There is a vast amount of information that I'm required to learn and retain in order to be effective as an advocate. It takes time and energy just to remember what I've said and/or didn't say sometimes.  I do my best to treat all of my clients and individuals but I have a lot of conversations and know a lot of people.  That's what it's like to be in this business for so many years.

One other thing that presents a very serious challenge in my profession is what I call "switching gears," meaning, going from one conversation or event to another completely different conversation or event within minutes and trying to leave the first event in lieu of the second.  What exactly do I mean by this?  For example, sometimes negotiations can get very heated, even between myself and my own clients (which should never happen, but it does).  Psychologically, it's difficult to just "drop" something that's extremely urgent, important, and may be really weighing on one's soul.  But since I have back-to-back appointments sometimes I have no choice.  So a negotiation blows up and I have to head out to show houses.  Time to "switch gears" and leave that event behind so that I can focus on doing the job for my other clients, which means concentrating on showing them houses and answering their questions and focusing on their needs, not mine or my other client's.  Easier said than done sometimes, but I've learned to deal with this over the years.  Most of my clients never even know what goes on with my other clients...unless I share something out of frustration.  But normally I just go on my merry way...until I have to go back and try to resolve whatever happened earlier.  It's trying at times but also can be rewarding.

Being my own boss has given me a measure of flexibility.  Even though that's true, I tell my clients that I'm available "most of the time," meaning just about any time of the day or evening, seven days a week.  Sometimes I wonder if I should set boundaries because I know from experience that if I don't, even well-meaning clients will unknowingly take advantage of me.  I don't set a lot of boundaries because I want to be there for my clients.  However, that sometimes gets me in trouble. My wife doesn't understand why I come home from work sometimes and get right back on my laptop and go back to work!  And why I take calls and read texts at dinner, during birthday parties, during wedding receptions, during concerts, and even during church! (ringer off, of course)  I had a client call me once while I was at an OSU game.  I called him back and he said "I can't hear you very well" and I said "that's because I'm sitting in the stadium watching a football game." (halftime)  So he pauses, and says, "Oh, does that mean you can't show us a house?"  Yeah, that's pretty much what it meant.  Granted, most of my clients are nothing like that.  But my clients do want their needs met and they expect me to do that.  What's interesting is how my clients sometimes define "urgent" and how I define it.  Sometimes, honestly, it really can wait until morning.  I've had to tell clients, "Well, not much we can do tonight, so let's just pick this up in the morning."  At 10:00 p.m. on any given night there isn't much I can do if a deal is in danger of falling apart. Yet sometimes somebody will want me to try.  Every one of my clients thinks what they need is important, and it is.  But sometimes what this client wants/needs is more important than what another client wants/needs right now. Try explaining that to the second client.  :)

Every job and profession comes with it's own set of challenges, no doubt.  I just wanted to share some of what it's like to do what I do for a living.  I'm sure there is more....maybe I'll do a part 3.  One other thing that I've noticed about my profession over the years is that there are so many different types of people, with various backgrounds and education, that are in real estate. What's great is that this industry has room for me.  I surely can't complain about that!           

So You Wanna Buy a For-Sale-By-Owner (FISBO)?

Being in the real estate business you can't avoid things like For-Sale-By-Owner properties, they are part of the territory. Also known as FISBO's (pronounced "fizz-bow'), one might think that they can get a bargain if they are trying to buy one of these properties. Unfortunately, that is not always true. Typically, in my experience, it's rarely true. What is true, however, is that people who try to sell their homes on their own and Realtors don't get along very well.

Almost everything in life comes down to numbers, or math, in some form or another. Such is usually the case for the seller who just wants to sell his home on his own. So why do people decide to try to sell their homes on their own? Because they think they can save money. That's pretty much it. For-Sale-By-Owners think they can cut out the listing Realtor, and possibly the buyer's agent as well, and save a bunch on commissions. But can they? And can a buyer get a "deal" on a FISBO? Are there other concerns?

First off, it's important to understand that homes are rarely sold in an arms-length transaction without the use of a Realtor. Why is that? Well, let's say the seller doesn't want a Realtor to list his home; he want's to try and sell it on his own. That's fine. However, almost all buyers, the savvy ones anyway, have their "own" agent, a buyer's agent. Rarely will buyers undertake such an important transaction without having someone to guide them. Why should they? Why would they? Considering that buyers rarely, if ever, have to pay their agent, why wouldn't they engage the services of a knowledgeable buyer's agent? Well, they would. So, what
normally happens is that these buyers are paired up with a buyer's agent and either the agent, or they, come across a FISBO. What now? As I said, buyers don't normally "pay" their agent. This is because in most situations a buyer's agent's fee is included in the price of the home, paid (shared) by the listing agent, for any home that is listed on the MLS (multiple listing service). So, you have a situation where the seller, in this case, is not a Realtor (agent). That means the FISBO seller has no agreement to pay any fees (or commissions) to anybody. However, will buyers look at a FISBO knowing that their agent may not get paid? Will buyer's agents show a home if they are not going to get paid in the end? Can you see how complicated this can get?
In reality, most FISBO sellers will agree to pay a "buyer's agent," they just don't want to "list" the house and pay "full commission." Most of them are aware that if they don't offer a fee to the buyer's agents it will be difficult to get showings and difficult to sell. So typically FISBO sellers will say "Realtor's welcome," or "will co-op," both of which mean that they are willing to pay the agent who is representing the buyer. So in essence, they may save partial commission, the commission that they didn't pay the listing Realtor. So is this a good deal for a buyer? I mean, if the seller doesn't have to pay a "full" commission, they will sell the house for less, right? Hardly. Did I mention that most FISBO sellers are  mostly motivated by money? 99% of the time if a buyer purchases a For-Sale-By-Owner the seller just pockets the extra commission they saved by not paying their own Realtor. Savings rarely get passed on to the buyer. So where are the savings to the buyer? Typically, there aren't any. In addition to not getting a discount from a FISBO purchase, sellers who attempt sell on their own notoriously over-price their homes. They always think their houses are better than the ones up and down the block. And occasionally they have some strange ways of coming to their asking price. Rarely does a FISBO seller accurately price their home due to lack of understanding, lack of knowledge, or just plain stubbornness. Ultimately, these homes are NOT a value for a buyer. And along with over-valuing their homes and being overly -thrifty (read: cheap), they usually do not understand how to negotiate a sale and they also rarely budge on their asking price. (Note: many FISBO sellers are not very motiveated to sell, either).  And some FISBO sellers seem downright paranoid that some  pesky buyer's agent is trying to get his clients, the buyers, a fair price on a home. That doesn't seem to resonate with most FISBO sellers that I've encountered. In the end, if the sellers save a few bucks on commission and sell for what they want, don't they save money? Isn't that goal in the first place?

Well, the answer is really "no." The main problem with true For-Sale-By-Owner homes is that they aren't marketed very well, if at all. Even with the internet it is difficult to find a For-Sale-By-Owner home, even if you are looking for one. These sellers are competing with the marketing power of thousands of Realtors in their local market. The bottom line is that buyers rarely find these properties. And that means they sit on the market, and eventually they end up being listed with a Realtor anyway. I would guess that 90% of homes that try to go FISBO end of being listed eventually (I read that stat just today). That means that the seller will now have to pay "full" commission anyway. And what about all of the lost market time, where the house just sat? It seems like, to me, that FISBO sellers who eventually list with an agent do so after six to twelve months. That's more mortgage payments, more upkeep, and potentially missed opportunities to buy something else because you couldn't sell your home fist.
In the end, there are rarely any savings to be had if you are a buyer considering buying a For-Sale-By-Owner home. But if you must buy one, proceed cautiously, know the value, and make sure you have a buyer's agent!

What Really Caused the Mortgage Crisis of 2008?

(note: this is a blog message that I posted back in October of 2008 when the market was truly in a crisis mode. I wanted to re-post it on here because I think it still has relevance, especially looking back to (2) years ago. Note my comment toward the end:

"In the future I guarantee that banks will make wiser decisions and there will be more oversight into how banks loan money."

I couldn't have been more prophetic. The Federal Government enacted sweeping bank regulations affecting mortgage lending that took affect on January 01, 2010. I wonder what else I said (2) years ago still resonates at the end of 2010?)

SNIP>>>>>>>>>>>>

October, 2008

Sure, you’ve heard all kinds of reasons why Wall Street is in crisis mode right now. Everybody has a reason as to why several prominent banks have failed. But I think it’s a little more complex than people think. Most people seem to be blaming it on “greedy executives.” I’ve got another take on this.

No doubt you’ve heard about “bad loans” and loan officers giving out some of these bad loans to “unsuspecting home buyers.” I am sure there are unscrupulous loan originators and mortgage people out there. Am I am also sure there some loan originators who were “casually” explaining the terms of their loan programs glossing over things like “adjustable” and “balloon payment” and the like.

So, many loan originators made mistakes, that's a fact. But who also should shoulder the blame? Maybe the consumer? That’s right, that “unknowing, innocent victim” that was taken advantage of by the loan officer with a pitchfork and a spiked tail. This crisis that is befalling Wall Street is partially caused by consumers who were getting loans but had no real ability to pay that mortgage. “You mean consumers knowingly got loans that they knew they couldn’t pay back?” (FYI, many of the buyers I have worked with had a budget and knew exactly what they could afford.)

I didn’t say the borrowers knew they couldn’t pay back the loan itself but I'm sure some of them knew that the amount of the loan and the payment "seemed kind-of high." I am also sure some loan officers and the underwriters knew that many of these borrowers were questionable. So even though the loan officers knew there was a risk involved with giving a loan to a questionable borrower, was the borrower actually “duped” into agreeing to a mortgage they didn’t understand? Did the loan officer hypnotize the borrowers and then make them sign something that would put them into ruin? Or did the borrowers maybe, just maybe, have a feeling they were getting in over their head? Did the borrowers read what they were signing?

We already know that many of the loans that were defaulted on were initially given to borrowers that were considered “risky” or even very risky. So why would the banks loan money to these people? First, because they could. This is because of the loosening of regulations that banks must follow in order to lend money to people. You’ve already heard about this. But what is the other reason that banks gave loans to people who may never pay them back? Because people wanted them. "If you'll give it to me, I'll take it."

Look, I’m not saying that there were not people who were mislead or outright lied to. There were. But there were many borrowers who knew what they were getting into. To be fair, lenders are required to give borrowers a “good-faith” estimate so that they understand things like interest rate, payment, closing costs, points, etc. If these borrowers didn’t understand the terms of their loan they could have asked. So, borrowers are given a good-faith estimate when they apply for a loan and then sign papers at closing that tell them what kind of loan and what kind of terms they are getting. Did somebody pull a fast one? Buyers can actually back out at closing if they do not agree to the terms of the loan. If a buyer signs something they don’t understand or don’t agree with I’d say that’s on them. Again, this is assuming that the lender didn't do something completely deceptive.

Mortgage people get a bad rap because of a few bad apples. But we have to remember that many of these people who defaulted on loans already had a history of credit problems and were “marginal” borrowers from the beginning. It’s not that hard to understand when the loan officer says “this loan is adjustable, that means your payment may go up.” Many buyers have a “buy now pay later mentality” these days. They see their friends buying big homes and they want one, too. So why would they want to risk loosing a house later for something like an adjustable rate mortgage or a balloon mortgage? Because it’s all about the here-and-the-now. “I want it, now find a way for me to get it. If the rate adjusts and my payment goes up I’ll find a way to deal with it.” Unfortunately, they way many of these marginal buyers dealt with the huge increases in their payments was by just not paying any more. And that is partially why we are where we are now.

I know there were legitimate, hard-working buyers who were probably misled by unethical mortgage brokers and they are now paying the price. But there are many buyers who got just what they bargained for. And now we all suffer the repercussions of loosening regulation, opportunistic mortgage people, and borrowers who made bad choices. We will dig out of this mess eventually. In the future I guarantee that banks will make wiser decisions and there will be more oversight into how banks loan money. I can only hope that buyers will also begin to make better choices as well.

What Do Buyers Look For in a Real Estate Agent?

So, the National Association of Realtors puts out a "Profile of Home Buyers and Sellers" every year for it's members. I downloaded and printed it, all 122 pages, (and in color as well, I might add). Being a bit of statistics guy I always look forward to data on buyers, sellers, the housing market, etc. That being said, I've been reading over some of the statistics for the past year, 2010.

Since I work only with buyers I'm mostly interested in what buyers have to say about their experiences in this past year with buying a home. This profile is exhaustive. Unfortunately, if you are not a Realtor, you cannot read it on-line or download it. However, I think you can purchase a copy from the website.

Anyway, regarding what buyers wanted regarding their agents a couple of things stood out:

1. When buyers were ask what they most wanted mostly from their agents, 51% of buyers said the most important thing they wanted from their agent was to help them find the right home. The second most important thing they want from their agent, at 14%, was to help them negotiate the terms of the sale. Help with price negotiations came in at 12%.

2. When buyers were asked "what is the most important factor when choosing an agent" 32%, the highest percentage, said that the agent is honest and trustworthy. The next closest answer, at 20%, was the reputation of the agent.

The data also shows that 83% of all people people who purchased a home in 2010 used a real estate agent/broker, which is up 6% over 2009 and up 15% over 2001. I find this interesting since 89% of all buyers use the internet in one form or another to help them in their home purchase. So, although buyers are searching for homes on the internet on their own, more of them are turning to a Realtor to help them complete the transaction. This is good news for us Realtors and it also show that the internet, with all of the listings available to anybody, is not our enemy, it's really our friend.

Going back to points (1) and (2), I just want to make a couple of observations. First, buyers want somebody to help them find the right home, the home that is for them. They don't want a slick-talking agent who chauffers them around and shows them homes that the agent likes. They want somebody to listen to their needs and wants and they want an agent who interacts with them on a personal level. The want somebody who is responsive. Gone are the days when an agent's job was just to drive you around a couple of times and "sell you a home." Buyers these days are seekers, seekers of information and seekers of agents who will actually help them to find a home and listen to what they want. Buyers want to be treated like they are valuable and like they matter. They don't just want to be a number, one of several "customers" for the average agent. They want to be treated as "clients," as somebody who has real value to their agent.

And then, even in 2010, the most important factor in choosing an agent is finding one who is honest and trustworthy. Not one who knows everything about everything in real estate, not one who's flashy, not one who has a bunch of designations next to their name. Buyers want somebody they can trust. Is that surprising? Well, if they are looking for somebody who they can actually establish a relationship with and who will be responsive to their wants and needs, doesn't it follow that they would have to trust that person as well? Of course it does. They are putting their trust in somebody because they need somebody who will guide them down the path to home ownership. And they are not willing to start down that path with somebody they don't trust. Again, not like the old days when you just "bought a house from the local Realtor." Buyers are much more sophisticated these days and they want the same rights that sellers have always had. They want an agent who is working for them, not just with them.

Buying a Home? Use an Exclusive Buyer's Agent

I was eventually going to break down different types of "agency" and "representation" offered to people who choose to buy a home. However, I feel this video does a better job of explaining "representation" for home buyers than anything I could have put in writing. This video is from NAEBA, the National Association of Exclusive Buyer Agents, a group that I have been a member of since 1997. They are an ADVOCATE for home buyer's rights. Watch the entire video, it really breaks down how having your "own" agent will protect you and why its not just a good idea, It's necessary.

http://www.facebook.com/index.php#!/video/video.php?v=1599654625844&oid=45574398770&comments