Thursday, June 19, 2008

Retainer Fees: To Pay or Not to Pay

I came upon a blog discussing the topic of buyer agents charging retainer fees. While there are some that are totally against paying retainer fees to a buyer's agent, there are others who understand the circumstances that would make the payment of a retainer fee valuable when it comes to retaining the services of a dedicated buyer's advocate.

Here is my comment:

From a buyer's perspective, I would want to know the buyer agent's policy regarding retainer fees before passing judgment. How will the agent or broker treat the retainer fee? Will they be returning the fee at closing, or will they be keeping the fee no matter what?

The answer to this question--in addition to the agent or broker's reputation--can determine whether a retainer fee is worth paying. Because, if a buyer's agent makes it clear that the retainer fee will be returned at closing, applied towards an appraisal, credited towards closing costs, etc., then one can safely assume that this agent or broker is only charging the fee to make sure that they are dealing with serious people; because, they only get paid when a transaction closes. They need to know that they are giving their best and dedicating their time, energy, and resources to serious clients only.

It is reasonable to assume that any employed person expects compensation for the work they do regardless of industry and regardless of whether they are on a salary, hourly wage, or any other form of compensation. How many here would go to work without the assurance of receiving a paycheck?

A good buyer's agent--especially, an exclusive buyer's agent with a good reputation for being a steadfast advocate for the buyer--is worth paying a retainer fee. When it is in writing that the fee will be returned upon the completion of a designated event, then this is a good indication that the agent or broker is not trying to "get rich" from charging retainer fees. Instead, they are merely looking for the assurance that they are dealing with serious people.

In summary

I work on retainer in my own real estate practice. However, I do not keep the retainers that I collect. Instead, I return them upon the completion of a designated event, which is ALWAYS in writing. I should also note that repeat clients NEVER have to pay retainer fees a second time and neither do the referrals they send my way. I am very dedicated to my clients' satisfaction. Their happiness means everything to me and I always give them 1000% of myself to inform, shield and protect the strength of their negotiating position. This alone substantiates the value of paying a retainer fee for my service--a fee that I return to clients in the end, which they do not have to pay a second time.

Monday, June 16, 2008

Buyer Beware: Washington State's New Distressed Property Law

Buyers and their buyer agents need to be aware of a new controversial law that took effect on June 12th called the Distressed Property Law HB2791. In a nutshell, if an agent, broker, or buyer says or implies certain things to a distressed homeowner or systematically searches for distressed residential properties (1 - 4 units), then under the new law that agent, broker, or buyer would then become "distressed home consultants" and they would suddenly owe fiduciary duties to the distressed homeowner under the new law, which falls under the category of consumer protection laws. That a buyer could even fall prey to this new law is truly unbelievable.

According to legal sources, the Washington Association of Realtors is working with the WA State Attorney Generals Office to correct the language of the new law which was passed at the last minute without any public comment. However, in the meantime, we all have to be careful (including buyers) until these legislative revisions have taken place. This law only pertains to residential properties of 1 -4 units. Properties of 5+ units are exempt from this controversial new law. The association explains how this law came to be:

How was this law passed without the Washington REALTORS® intervention?

The Washington REALTORS® closely monitored the legislation as it was proposed by the Attorney General as the legislation progressed through the House and the Senate. Both the Washington REALTORS® and the AG were satisfied that the Bill, as proposed and intended by the AG, did not include the adverse language now causing the problems. However, after the Bill was passed in one form by the House and in a slightly different form by the Senate, it moved into a process that occurs outside the arena where public comment or influence are allowed. It was at that stage that the adverse language was added and the Bill was immediately voted out of the Legislature without any opportunity for the AG or the Washington REALTORS® to testify about the problem.

Source link: "What You Need to Know About Washington State's New Distressed Property Law HB2791"

Tuesday, June 10, 2008

FHA Threatens to Ban Downpayment Assistance Programs

Today, the New York Times revealed the FHA's plan to do away with downpayment assistance programs offered through non-profits because they expect $4.6 Billion in losses, which they attribute to these programs. FHA commissioner, Brian D. Montgomery, warns that the F.H.A., "would have to renew its efforts to end the seller-financed down payment program, which accounted for 35 percent of its loans in 2007."

Rachel L. Swarns, the writer of this news piece explains how these seller-financed downpayment programs work:

"Under the program, a home seller arranges to cover the buyer’s down payment, using financial help from a nonprofit company, but typically adds that sum or more to the price of the house. The deal has been particularly attractive to financially struggling buyers and to owners in depressed markets, according to Congressional officials."

There is much debate with congressional leaders as to whether or not the FHA should ban these programs. On one side, critics say that these programs put overpriced homes in the hands of the poor. On the other side, supporters claim that banning these programs would make homeownership unattainable for low income families.

I believe there is a middle ground somewhere. Downpayment assistance programs are ok so long as buyers can afford them. The problem starts when buyers cannot afford the higher purchase price that results from adding the downpayment and closing costs to the purchase price so that the seller is willing to pay them on the buyer's behalf. Instead of banning these important programs, it would make more sense to implement stricter income qualifying requirements for buyers intending to use these downpayment assistance programs OR any other alternative to a straight ban on downpayment assistant programs.

Read full article here, F.H.A. Faces $4.6 Billion in Losses.

Saturday, June 07, 2008

Multiple Offers: To Engage or Not to Engage, the Answer is up to You!

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I recently came across an interesting discussion among peers regarding the dynamics between buyers, sellers, and their agents and whether a buyer's offer is kept secret when presented to a seller and his or her agent. While the discussion was technically not about multiple offers, the discussion evolved to include this subject because the original post mentioned some of the things a seller's agent might do when there are multiple offers on a home; for example, when the author said, "Often the seller will counter the most qualified buyer with the higher price of another offer from a less qualified buyer. Technically they didn’t 'reveal' your 'offer,' but they used your price as the counter price to a different buyer."

These are the kinds of things that buyers need to be aware of before deciding to engage in a multiple offer scenario because ultimately the goal of a situation like this is to get the highest price possible for property. Depending on the situation, and the people involved, this scenario often leads to compromising the strength of a buyer's negotiating position. A good buyer's agent should work to shield, inform, and protect a buyer's negotiating position because through this strength a buyer has the best chance of negotiating the best deal possible. A compromised negotiating position means that a buyer has lost all of his or her bargaining chips and must now deal on the seller's terms if he or she wants to pursue that seller's property. Some agents might argue that some homes are worth pursuing in a multiple offer situation, but the decision of "worth" is ultimately the buyer's to make once they fully understand the rules of engagement because a situation like this truly falls under the seller's rule. Instead of negotiations, the transaction will seem more like an auction and the multiple buyers involved become levers in the seller agent's quest to get the highest selling price possible for their seller. In my opinion, buyers should not oblige, but it is up to the buyer whether or not they wish to engage.

A multiple offer situation is the best possible scenario for a seller, period. Indeed, it is quite the opposite for a buyer. Even under the advice of a buyer's agent of whether or not to engage in a multiple offer situation, the choice to engage is still the buyer's decision to make.

Click here to read the full post: