Thursday, August 23, 2007

Good Information: The Art of the Aggressive Offer

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This is a very interesting article by Amy Hoak of about negotiation strategies in a buyer's market:

"CHICAGO (MarketWatch) -- Home sellers are not automatically turning up their noses at offers that come in far below their asking price these days as prices stagnate and the inventory of homes for sale remains elevated in many markets" (Hoak)

Wednesday, August 22, 2007

Good Blog: Fuzzy Distinction, but Clear Conflict of Interest

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A good Blog to read:

"In May, 2004, I began interviewing real estate agents to assist me in purchasing my first home. I interviewed Julie Tuggle, an exclusive buyer's agent, and two other real estate agents (who represented both buyers and sellers). During each interview I asked the agent what they would do if I liked one of the homes that they were listing. I was shocked when the two dual agents replied that they would be able to represent both sides. I am an attorney (licensed in Florida) and I could not fathom how this was not a blatant conflict of interest."

Read entire Blog: "Fuzzy Distinction, but Clear Conflict of Interest."

Tuesday, August 21, 2007

Readers Respond: June Fletcher Tells it Like it Is!

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In a recent article entitled, “Readers Respond: Using A Buyers Agent,” June Fletcher, a staff reporter at The Wall Street Journal, the author of "House Poor" (Harper Collins, 2005), and columnist for “House Talk," set a few misconceptions straight about what an exclusive buyer's agent can do for their buyer clients.

When a Poulsbo, WA agent said, “If you never negotiate from the sellers agent perspective, you are less prepared to position negotiations effectively with sellers in service to your buyer….many [clients] can't buy until they sell. You're suggesting not to use one agent for both?” June answered, point blank, “Well, yes I am -- if you can find an agent who specializes in working just with buyers. The idea that exclusive buyers agents can't understand a seller's perspective is hogwash…”

Cite Source:

Kudos to June for setting things straight, and telling it like it is. The idea that an exclusive buyer's agent cannot possibly understand the seller’s perspective is untrue. As a matter of fact, they can offer home-selling guidance as a value-added bonus to buyer-clients who prefer to sell on their own--but it needs to be said that, as sellers, they would benefit from the experience of a good listing agent.

Listing agents and companies who dedicate themselves to the seller can bring advocacy to the table for the seller, which is invaluable. The same principle applies to exclusive buyer agents and their companies; they provide advocacy for the buyer, because they only represent buyers. The key is avoiding dual agency.

An exclusive buyer's agent can offer guidance without actually taking the listing--and therefore--without charging any fees. Some exclusive buyer agents may offer this guidance to loyal clientele, and again, it is only guidance--not advocacy. Most agents will frown upon this practice, and many would regard it as, “leaving money on the table.” However, an exclusive buyer agent could do this as an added value to their buyer-clients.

For buyer-clients who prefer to sell using the services of a listing agent (recommended), an exclusive buyer’s agent can refer them to the best listing professionals in the market. They can do this because they are in constant contact with them at networking events, real estate classes, and during the course of everyday business. The best listing agents are those forward-thinking professionals who understand and respect the new consumer-driven economy. They are not threatened by the change, and in fact, welcome it because they know that consumers will benefit greatly. They realize that when consumers are happy, trust is sure to grow, and when trust grows, the public's general perception of real estate agents will also improve. Everyone wins.

Bottom line, real estate is not a cut-and-dry world anymore. There are many more options available, and Old-school real estate agents need to update their out-moded ways of thinking. It is now more consumer-driven than ever before, and it is now up to consumers to educate themselves on the options available to them, and to decide for themselves how they want to be represented. A growing number of them are learning about the many options that were never available to them before.

An Interesting Discussion: Garbage In, Garbage Out - Getting the Best from an Agent

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Every once in a while, a Blog pops up that really hits on some interesting points. This particular Blog entitled, "Garbage In, Garbage Out - Getting the Best from an Agent," Jessica Beganski, a Realtor and an exclusive buyer's agent from South Windsor Connecticut, discusses two common buyer perceptions and misconceptions that she has observed in her experience. This Blog is interesting because Jessica captures the core of how buyers can get the most out of working with an exclusive buyer’s agent:

From Jessica’s Blog:

“A buyer’s agent will not run out to the property because you are not our client (yet) and we haven’t even met you. I am my own product - I sell my services not the house you’re buying."

"So, if you want top notch service and a great house, think about how you are perceived by the agents you contact when looking for a house.”

Cite Source: Real Estate in Connecticut

Monday, August 20, 2007

Good Information: How to Shop for a Mortgage Today

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A recent article in Kiplinger’s Personal Finance magazine entitled, “How to Shop for a Mortgage Today,” by Pat Mertz Esswein, discusses the new lending environment in the mortgage market. In general, it touched on the major changes that will be affecting homebuyers. However, one specific point stood out that illustrates the importance of an improved credit score, as well as, the impact on monthly payments:

Is it worth waiting to buy until I can improve my credit score?

“Probably. The average rate on a 30-year fixed-rate mortgage is typically at least 1.5 percentage points lower for someone with a credit score of 760 to 850 than for someone with a score of 620 to 639. On a $216,000 loan, a borrower with a top-tier score would pay $232 less per month -- a saving of $2,784 per year -- than a borrower near the bottom, according to”

Cite Source:

Saturday, August 18, 2007

One Bad Apple Don't Spoil the Whole Bunch

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An interesting Blog came up yesterday regarding a letter from a buyer seeking advice. The advice sought was in regards to the questionable policies of an exclusive buyer's agent they claimed was found through NAEBA--which is quoted below:

"1. He stated that his commission was 4% of the total price of the house. 3% of which must be paid by the seller agent and 1% by me. And the combined should be a minimum of $10,400 (if the 3+1% of the home price doesn't come upto 10,400, I have to pay whatever is remaining). Is this the norm? Or is he asking too much?

2. He also stated that he will show only a maximum of 25 houses excluding open houses that we attend on our own. His point was that people usually choose from 10-15 houses that they see. If we do not find a suitable one within the first 25, the Retainer fee of $1,500 will have to be forfeited. Is this reasonable?I appreciate your input towards these questions. Once again, thank you very much!"

While this is certainly alarming, this in no way reflects the policies of all exclusive buyer agents. These are the questionable policies of only one person. As with everything else in life, there is good and there is also bad. This is a universal truth that applies to services in all industries. This is why it is important to open the lines of communication, so that policies can be discussed upfront and negotiated, if necessary.

Tuesday, August 14, 2007

United We Stand, Divided We Fall: Buyer Agency and the Fragmented World of Real Estate

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In a recent Accredited Buyer Representative class, it came as no surprise that out of approximately 36 attendees, there was only one exclusive buyer’s broker in attendance. Although most of the information presented in the class was informative, insightful, and the content was well-delivered, it was alarming when two Realtors announced to the class--on two separate occasions--the “old saying” that “buyers are liars.” The first thought that came to mind was, why?” If these Realtors really believe that buyers are “liars,” then why are they even in this class to begin with? Unfortunately, with the exception of a very small few, this is a pervasive belief among traditional agents and brokers—a belief not shared by those who have chosen to serve buyers only.

This was a three-day class, and each day was eight hours in length. It was just enough time to experience the “niceties” of certain traditional Realtors, who demonstrated their narrow-minded worldviews, values, and norms. Some had behaved abrasively, as well as, condescending. They revealed their own prejudice beliefs, as many before have done in the past, that unless one is part of the herd, they do not deserve any professional courtesy.

It was an eye-opener to see the friendly expressions of certain Realtors suddenly change into seething animosity, when told of the decision to represent buyers only. You would have thought a mortal sin had been committed. The consumer value of having the option to avoid dual agency completely did not compute within the minds of these people.

Some traditional agents have gone as far as to say that dual agency is not even an issue, as long as consumers liked them. However, it is an issue when the dual agent cannot negotiate for either side; or when a dual agent company has to remain neutral in the midst of a transactional conflict. What are dual agents being paid for, if they cannot provide the valuable service of negotiation, and if they cannot provide advocacy for neither side?

Now we turn our attention to the culture of exclusive buyer agency. This culture is small, but growing—struggling for recognition and acceptance by Realtor associations that normally favor traditional real estate brokerages. The associations they struggle with do little to educate the public about the option of exclusive buyer agency. Furthermore, they add to the confusion by blurring the real meaning of this agency option. For example—the Washington Association of Realtors has a standard pre-printed form called an “Exclusive Buyer Agency Agreement,” yet there is a clause within this form that gives the option to consent to dual agency. If an agreement is truly for exclusive buyer agency, then dual agency should not even be a part of it, because dual agency is a non-issue where this agency option is concerned.

Honestly, a buyer agency agreement becomes exclusive only when the option of dual agency has been removed--otherwise, it is just a buyer agency agreement.

Delving further into the world of exclusive buyer agency, we see a rift within the fragment. This culture is centered on an association that has let former members down in the past. This association is NAEBA. Instead of unity and camaraderie, there were arms-length adversarial attitudes within the group, and no support—as promised in their membership literature. When an exclusive buyer agent breaks away from the disappointing experience, they are then discredited for not belonging to the organization anymore. For example—in a recent Blog—an exclusive buyer’s broker touted the news of an article he claimed was recommending that buyers only work with exclusive buyer agents who are members of NAEBA. However, upon review, it was realized that the article only mentioned that buyers can find an exclusive buyer’s agent through NAEBA. The article made no specific endorsement advocating the sole use of NAEBA members.

It needs to be said that not all professional exclusive buyer agents are NAEBA members, mostly for the reasons already mentioned above.

The final fragment we will explore in the real estate industry is the culture of the discount brokers. Like the exclusive buyer agents, they are new to the industry, and they have also drawn the ire of the industry for going against the traditional ways of doing business. However, they have taken an adversarial position against all Realtors, including buyer agents, and inadvertently exclusive buyer agents. They have unfairly shrouded the entire industry under a cloak of suspicion—leading many consumers to believe that they are the only credible option available. Because certain discount brokers have ties to the media—which is notorious for delivering biased information—they are able to spread their inaccuracies nationwide. They profess that consumers are victimized by the industry, yet they fail to take into consideration that not all real estate professionals are alike. They are content to make sweeping generalizations about matters they are not fully informed on. Certain discount brokers contradict themselves by claiming that they do not practice dual representation (dual agency), yet if a buyer purchases a property through them, and the property is listed with their company, this is dual representation on the part of the company.

Bottom line:

The real estate industry is about serving the best interests of our clients, period. It is not about our egos. It is not about our “net gross sales last year,” nor is it about out-selling “Sally Sells-A-Lot” next door. It is not about spreading deceitful propaganda and half-truths to induce consumer action, and it is not about suppressing valuable agency optionsnor alienating the practitioners that choose to make these agency options available. It is only about the welfare of consumers, respecting their right to be represented, and respecting their freedom to choose how they want to be represented. They have a right to full disclosure as to what their agency options are, because without full disclosure, they cannot make fully informed decisions on matters that can materially affect them.

Food for thought:

Will the real estate industry ever gather and reconcile its fragments for the sake of consumer welfare? Will real estate professionals ever learn to respect each other, and the diverse cultures that have evolved within the industry? Will old-school Realtors ever learn to understand that these diverse cultures are no less deserving of professional courtesy and mutual respect? Will certain discount brokers ever stop spreading inaccurate propaganda and half-truths to induce consumer behavior? Time will surely tell.

Positive change in the real estate industry will require integrity, diplomacy, transparency, tolerance, mutual respect, and understanding. Until we have these ingredients, we cannot fully serve the best interests of consumers, nor can we become a united industry.

Saturday, August 11, 2007

The Mortgage Meltdown, and What it Means for Homebuyers

We live in chaotic times, and now with foreclosures on the rise, this chaos has extended itself to the mortgage market. The impact of this has caused mortgage investors to lose confidence, which has reduced the amount of cash available for new loans. A recent news piece by the Associated Press reported that, “The shocks to the industry are siphoning lenders and cash away from the market, which reduces competition and restricts people’s access to home loans.”

With the loss of available cash for new loans, lenders have tightened their lending requirements, and some lenders have been forced to go out of business—filing for bankruptcy. According to an article by RISMEDIA entitled Mortgage Mayhem, the reason for the fiasco in the mortgage market, “…is largely based on the fact that market conditions in both the secondary mortgage market and the national real estate market have deteriorated to the point that many mortgage businesses are no longer viable or as profitable as before.”

So what does this mean for homebuyers?

It means that it is now more difficult for buyers with less-than-perfect credit to qualify for a mortgage. The Associated Press had quoted George Hanzimanolis, president of the National Association of Mortgage Brokers , “lenders have raised the minimum credit score that qualifies for financing. Most lenders now require bigger down payments, he said, and are eliminating exotic loans or making them more difficult to qualify for.” He mentioned, “The silver lining is that people with good credit who can document their income have the same access to home loans as they did a year ago.”

First time homebuyers will have a tougher time buying their first home, but hope is not completely lost. The condition in the mortgage market now requires first-timers to do a little more planning, and more saving for the future. Buying a home is not only one of the biggest financial investments of a person’s life, but it is also one of the biggest responsibilities. It is worth taking the extra time to plan and wait—making sure that all financial considerations are in order, saving enough money for a larger down payment—with some savings left over—and making sure that credit scores are brought up to justify a lower interest rate.

If a buyer's income is good, but for whatever reason, they cannot qualify for a mortgage, then there is the option of lease-to-own. This is a good way for buyers to be in a home, while improving their situation to qualify for a mortgage in the future. Considering the current condition in the mortgage market, more sellers might be willing to entertain such an arrangement if buyers can demonstrate that they have a steady job situation, and they can support the monthly lease payments.

Buyers will benefit in the long-run from the stability that results with making smart financial decisions. Timing is everything, and this principle certainly applies to buying real estate.