Within the real estate industry. If you’re curious or interested in the ongoing conversation about raising the standards of professionalism within the real estate industry, tune in to Blog Talk Radio tomorrow to hear the first in what promises to be a brilliant series of conversations (myself excluded).

Raise the Bar on Blog Talk Radio. Tuesday 9 February at 2pm EST.

From ethics to contract-writing to putting photos in the MLS, there are no real (enforced or enforceable) standards of professionalism in the real estate profession. (One of the many ways that Nest Real Estate Group is different )

For a primer on this conversation, spend ten minutes reading this fantastic discussion.

Update 10 February 2010: If you have an hour to kill, you can listen to the Raising the Bar show.

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Production matters.

How many clients do you represent every year?

But it’s just one of the many questions buyers or sellers should ask when they are interviewing their potential representation.

Questions to ask your agent in Charlottesville

Great Questions for Sellers to ask

I’m grateful (and work really hard) to be in the 10+ segment of the above chart. I firmly believe that if an agent is not doing at least 10 transactions a year, they’re likely not going to survive.

If they’re doing less than five transactions a year, they’re likely doing themselves, their profession and their clients a disservice. (one of the reasons Nest has high standards for our agents)

The Charlottesville and national real estate markets are changing and evolving so rapidly that unless one is practicing regularly, they’re just not going to be prepared.

Think about it – would you go to the thoracic surgeon who did two surgeries a year, or the one who did dozens?

Do you want your attorney figuring things out as he goes?

Your mechanic reading “how-to” books (or worse, not) throughout the process?

Your barber trying a few things out?

Update 13 October 2009:

The WSJ has a related story today.

The housing market’s long decline has left once-thriving real-estate professionals scrambling for supplemental income or changing professions.

Realtors, agents, brokers and builders rely on sales and commissions for most of their income. And their incomes plunged as sales of existing homes fell 13.3% to 4.9 million last year from 7.1 million in 2005, the most recent peak. The National Association of Realtors says median income for Realtors and brokers fell to $36,700 last year from a high of $49,300 in 2004. The group’s membership fell to 1.14 million in September from 1.35 million in September 2006.

That only 16% of Realtors nationwide have chosen to change careers is a bit shocking.

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In the words of a client – an actual buyer in the Charlottesville, Virginia real estate market – ie: I am not making this up. He had visited Charlottesville on his own several months before his wife, who was visiting without him. Because of this, she and I were revisiting some of the properties that he had previously seen. This is an email he sent to me about some of the photos and properties in the Charlottesville MLS.

No doubt, my wife had already informed you that I visited (the property*). Frankly, I was shocked and angered by revisiting the photos of that property. The property as it is today bears little resemblance to the pleasing pictures used to advertise it, which were almost certainly taken when the property was in better condition; one could even say the pictures are a hoax.

During my admittedly brief encounter with properties in Charlottesville, I learned that pictures of practically all the properties I visited were modified by a combination of software and choice of camera lens. I don’t know if there is a way out of this conundrum except by physical, onsite visit.

Incidentally, the video you provided on (another property) was an accurate reflection of the property, a far cry from doctored photographs.

…

I am not certain whether my wife expressed our combined gratitude for your effort in obtaining the video of (the home in Charlottesville), hence I mention it here. Broadly speaking, however, it is not practical to dispel the carefully constructed myth around each property of interest with the energy you have invested in obtaining the videos for (these two homes in Charlottesville).

You’ve seen them – the pictures in the MLS that look too good to be true, with colors that seem as if they were photoshopped by someone on acid or mushrooms, lights so unnaturally bright that the house can’t possibly have that many recessed lights, or it must have a wall of glass and the pictures were taken on an exceptionally bright afternoon … these pictures suck.

Nothing good can come from unrealistic photos –

1 – The seller suffers because the buyer is either disappointed or pissed off or both
2 – The Realtor has served to discredit him or herself and his fellow Realtors.
3 – I suffer because members of the public may assume that I practice real estate in the same manner – which I don’t
4 – It’s an opportunity for good Realtors (such as myself) to distinguish themselves by doing the job better.

I know which Realtors generally do a good job with marketing homes, and I know which ones do a poor job … and I really wish someone would tell these sellers what a disservice their “representation” is doing for them; but that’s not my place. I do however tell my clients this insight.

Sure, it could be construed as puffery, but why stoop to that level?

For an example of realistic versus marketing, take a look at these two videos for a property I am marketing in Parkside Village in Crozet. Both are valuable and un-puffed, if you will; the one on top provides a very good “marketing” video and the one below is a “realistic” point of view. I take a lot of videos for my buyer clients, particularly ones who are out of town (and quite a few international clients this year … more on this later), and put the videos on password-protected sites.

I’ve been experimenting with post-processing of listing photographs for some time. But the intent is always to provide a clear, honest and accurate representation of the properties I am marketing in the Charlottesville area. The absolute worst thing I can do in my capacity of representing the seller is to set potential buyers’ expectations at an unreasonable level – be it high or low.

I’ve been talking about how sellers need to check up on their Realtors for far too long, by the way.

It is the Realtor’s responsibility to do his or her job well. It is the client’s responsibility to check up on what their Realtor is doing on their behalf.

* As much as I want to write about specific properties and Realtors, there is the potential that doing so might be construed as being in violation of the Realtor Code of Ethics – even if what I write is true and accurate. So, I’ll save whatever capital I have for another day. I’ve learned to pick my battles.

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As a Buyer’s Agent, I can tell you about what is contained within the four corners of the property and can (and do with the appropriate caveats) speculate about what may happen outside those four corners. 

Heck, I heard a story last week about people who had moved into the City of Charlottesville thinking that they were moving into the County of Albemarle. (I don’t think those folks had representation) Check, check and double check everything.

This stuck out to me in the HooK this week:

Almost as soon as she moved here in 2006 and bought a three-acre spread on Pritchett Lane in northern Albemarle, Neff got a taste of local issues like rural v. growth areas.

"My realtor didn’t bother to say that North Pointe [development] was moving in across the street," recalls Neff. "I’ve got cows across the street." (Ed. note: link to North Pointe added by me)

Not speaking directly about this particular example but the "what’s going on around me" in general:

The Commonwealth of Virginia Disclosure Statement says -PDF- (in part):

(a) The seller is making no representations with respect to any matters that may pertain to parcels adjacent to the subject property. Purchasers should exercise whatever due diligence they deem necessary with respect to adjacent parcels in accordance with the terms and conditions of the purchase contract, but in any event prior to settlement on the subject property.

If you don’t own it, it’s going to change.

This is why I tell my clients that everything can change.

As a consumer, it is your responsibility to ask questions. As a Realtor, it is my job to educate my clients as much as possible. My particular favorite answer is, "I don’t know … but I’ll find out. Have you looked at Charlottesville Tomorrow?"

Resources:

Albemarle County’s fantastic GIS site.

Louisa County’s great GIS site

City of Charlottesville’s GIS site Wait, they don’t have one for some bizarre reason. With all of their budget surplus, couldn’t they find a way to fund a better, more functional online tax assessment site?

Update: Thanks to Dirt Worshipper’s comment, I remembered Albemarle County View. Awesome. Now … if they’d just post their crime statistics in a format other than a PDF …

Update #2 17 August 2009: This seems like the most appropriate space to mention Albemarle County’s being named the Sixth best county for delivering digital services by the National Association of Counties and the Center for Digital Government.

From the press release:

For the seventh year in a row, Albemarle County has been named among the top ten most technologically advanced, cutting edge county governments of its size in the U. S. by the Center for Digital Government and the National Association of Counties (NACo) in their 2009 Digital Counties Survey. Albemarle County ranks sixth in the nation, up from ninth place last year, in utilizing information technology (IT) to deliver high quality service to its customers and citizens based on a population category of 150,000 or less. Albemarle is among only six Virginia jurisdictions ranked in the top ten for the four population categories.

“We are delighted to be included in the elite communities across the country that are receiving national recognition for providing quality information technology services to their citizens,” said County Executive Bob Tucker in response to the county’s ranking. “We continue to see significant increases in the number of citizens using our website to conduct business at their convenience, which greatly improves the efficiency and accessibility of county government.”
The Center for Digital Government (Center) has found in its annual Digital Counties Survey that America’s counties are embracing new technologies to involve citizens, are moving toward transparent government and are increasing green and sustainable measures while continuing to improve online services. The 2009 Digital Counties Survey is an annual study by the Center and the National Association of Counties (NACo) which identifies best practices and recognizes those counties with exemplary digital service to their citizens.
Center Executive Director, Cathilea Robinett, said, “Despite challenging economic circumstances, America’s counties are continuing to use new tools such as social media to engage and encourage citizen participation and feedback. Additionally, counties are moving forward in very responsible ways by green and sustainability efforts, energy efficiency monitoring, e-waste recycling and government transparency. We heartily congratulate all the winners!”
Counties were asked to respond to questions that included more than 100 measurements and data points about online service delivery, infrastructure, IT architecture and governance models.
The Center for Digital Government is a national research and advisory institute on information technology policies and best practices in state and local government. The Center is a division of eRepublic, Inc., a national publishing, event and research company focused on information technology in the public sector.

View the full list of winners at www.centerdigitalgov.com

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I wouldn’t have known about the allegedly controversial Smart Money article had the President of the National Association of Realtors not addressed it (without a link to the Smart Money story as is common blogging practice) ….

“10 Things your Realtor won’t tell you” is a silly article that plays on fears, stereotypes and ignorance – some of the stereotypes are true, but don’t lose sight of the fact that lists like this drive traffic and help them sell their book. As with much of what you read, do your own due diligence. I’m surprised they didn’t have #11:

Dual Agency is good for you.

Smart Money’s "10 Things your Broker won’t Say":

1. “Your open house is really just a networking party for me.” – True.

2. “My fees are negotiable.” True.

3. “Think you’ve had no offers? Actually, there’ve been several.” A ludicrous statement. Every offer gets presented.

4. “I’m not obligated to keep my mouth shut for you.” True. Unless the client signs a buyer-broker agreement.

5. “Sometimes I forget whose side I’m on.” Insanity. I always know whose side I’m on – my clients’ side.

6. “I know zilch about zoning.” Likely true for some (many?) Realtors.

7. “I won’t let termites—or pesky inspectors—kill a deal.” Note at the end of the linked paragraph that they’re trying to sell books with stupid statements such as this.

8. “I sometimes forget I’m not a lawyer.” Nope. Never. I’m not a lawyer, but I know several good ones.

9. “My website is a dead end.” Nope. My websites and blogs are educational tools that provide plenty of ways to communicate.

10. “You can probably do this without me.” True for some.

This is my response to the NAR’s response to the Smart Money article at Agent Genius, specifically to the claim that all Realtors are trained professionals.

No, no we’re not “trained professionals.” When I finished my 60 hours of real estate “education” I was no more prepared to practice real estate than I was to fly a plane off an aircraft carrier.

Out of the gate, I was no more prepared to represent  clients than I was before. Thank God I had (and still have) a tremendous, successful, ethical and dedicated mentor who has been in the business longer than most Realtors. (my mother)

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Part One of at least Two.

I was looking at Google’s blog post about how they have taken their real estate search to Australia, and I revisited their real estate search here in the United States. They have the most boldly assumptive FAQ I think I have ever seen.

I’m an agent. How will my listings compare with those of a broker or MLS? Is it worth uploading?

Absolutely. We recommend that all members of the real estate industry upload their information. The important thing to remember is that you should include as much listing information as possible, and also include a link to your website. Your listings will appear alongside other listings that are relevant to a given user’s query; it’s ultimately up to the user to choose which link they click in order to learn more.

Translation: Of course you should give use your data! Why would you not want us to have it?

My favorite:

I’m a broker. How do I ensure my agent doesn’t upload?

We can’t prevent anyone from uploading content to Google Base; however, your agents will have less incentive to upload if you’re already doing so for the listings they represent.

Translation: Why would they if you’re already doing it? You are sending us your listing feeds, right? Right?

The fact remains that the best real estate search available right now is the one provided by your local MLS – in my case, the Charlottesville area MLS – but that’s probably going to change at some point. Not Trulia, Zillow, Cyberhomes (yet) … this is how to search for homes in Charlottesville …

More at Mashable.

Update: 06 July 2009: Google elaborates a bit on some of their more impressive and useful changes.

More:

Agent Genius

Bloodhound

Google:

For now, I maintain that searching for homes (via the MLS) is not my core competency as a Realtor. I represent clients – buyers and sellers – and search is but one component in that representation.

Buyers (and Realtors) should search everywhere, but that’s often not reasonable or viable … and the wide range of disparate information

From the Virginia Association of Realtors’ Exclusive Right to Represent Buyer Agreement: (pdf) – bolding mine

(f) Buyer understands that Broker’s principal source of information about available properties will be local multiple listing services; however, Broker may from time to time become aware of properties for sale but not submitted to the local multiple listing service and that may be suitable to Buyer. Buyer’s obligation to pay the fee set forth in paragraph 6(a) shall apply to Buyer’s purchase of such property, and any property submitted to the MLS with an offer of compensation to Broker less than the amount set forth in this paragraph 6(a). Broker agrees to apply any fee received from the seller or broker thereof to the amount owed by Buyer under this Agreement and Buyer shall be responsible for any additional amount owed pursuant to paragraph 6(a). Broker shall have no obligation to search out such properties beyond those that come to the attention of Broker in the ordinary course of Broker’s business.

How does one define "ordinary course of Broker’s business"?

Part Two will cover this question.

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This bill in the General Assembly makes no sense.

Or … get away with it for fifteen years and you’re good to go. Or … after fifteen years, there’s nothing left to learn. Can’t teach old dogs new tricks?

I’ve been assured that the Virginia Association of Realtors will fight this bill; hopefully they’ll have better luck in the House of Representatives, because the bill has unanimously sailed through committee and the Senate. The red italics indicate the proposed change

C. The Board may waive any requirement under the regulations relating to education or experience when the broker or salesperson is found to have education or experience equivalent to that required. The Board shall waive the broker education requirement for any applicant for a brokers license who has, for more than 15 years, owned a real estate brokerage firm and during that time, maintained an active license as a real estate salesperson.

What? If nothing else, this proposal highlights the remarkably low barrier of entry to the real estate profession. That not one Senator felt compelled to vote against it is either astounding or not surprising at all.

This strikes me as an attempt to shore up the flagging real estate business model that has dominated the industry for the last thirty forty fifty plus years. Pure politics wielded by those who are seeking to stave off evolution and obsolescence. Or as Rob says so eloquently:

But at the heart of evolutionary theory is the notion of competition. Evolution is not, as popular usage of the phrase has come to mean, a peaceful, gradual change from one state to another. It is a violent conflict, with winners and losers, and the losers in evolutionary struggle almost always die.

Why are education, evolution and innovation so anathema to many of those in power, who have been in the business for so long?

If time allowed I’d go to the General Assembly and wander the hallways making inquiries of those who have already voted for this bill and lobby those in the House who have yet to vote. But, this is the best forum I have available.

I’m trying to be open minded about this, trying to keep perspective. Maybe I’m mis-reading the bill’s intent. I welcome any defense of the proposed change. Please – educate me (and do it quickly, because there might be another bill out there removing all real estate education requirements).

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An interesting higher-level editorial piece in the Wall Street Journal on Saturday, while not written with the real estate industry in mind, has some clear parallels -

Marketing 3.0 is now the science of devising and managing directed business memes: call them bemes. Bemes are sent by members of social communities to each other and typically contain a reward or exclusive offer, which, when redeemed, also results in a reward coupon for the sender.

Here’s the thing – more now than ever before, the brand that matters most to the real estate consumer is the value added by the individual Realtor, not the brand. (and I’ll bet I could back this up with statistics if I had the resources to pull off a survey)

Of particular note regarding the current fragmentation of the real estate listings universe – (bolding mine)

From silos to simultaneity. Too many retailers today persist in believing that online shopping is merely a virtual extension of real world shopping. That is a big mistake.

Rather, online and offline need to coexist, and we need to rethink how they relate. For example, to their surprise, companies like BestBuy (which even encourages customers to shop the aisles but buy online from in-store kiosks) and Macy’s are discovering that physical retailing is a perfect way to move units online. That is, the physical world has become the showroom for the virtual realm.

Retailers now must reimagine a world where consumers experience products in stores but ultimately buy them on the Web: Stores are for experiences, the network is for inventories. And what in turn prepares potential customers for what to look for in stores? Online communities.

All of this suggests that Marketing 3.0 is not only different from its predecessors, but actively undermines them. If your marketing program fails to adapt to this new world, it won’t just become irrelevant — it will actually work against you.

There are very few big brokerages* in the real estate world who are embracing this “new” media (hint: it’s not new anymore).

The way forward is relatively clear – but will/can the big box brokerages adapt before they become dinosaurs, much like the Big Three automakers hopefully will?

If you’re a broker, big or small, read this at Chris Brogan’s site -

Today, we wonder how newspapers survive. Today, we wonder how the music industry will survive. Today, we wonder how GM and Ford and the rest of the US auto industry will survive. We worry about a lot of larger scale creations.

…

Tomorrow (and I mean the day after you read this), we already are equipped with the most robust and least expensive toolset for communications that the world has ever seen. We possess massive distribution networks for free. We are all Gutenberg. We are all Murdock. We are all available and ready.

Read more about silos and how the concept relates to MLS’ at Michael Wurzer’s FlexMLS blog, where he says, “NAR could create a non-profit that could be the ICANN for property IDs, and that would be valuable for tying together the efforts of those publishing real estate info on the web. Trying to cram everything into one silo is never going to happen.” (bolding mine)

*Better Homes and Gardens excepted

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Well, at least it should.

I thought I had fractured my wrist playing soccer two weekends ago (turns out the x-rays say I just have a bad boo-boo). Apparently it takes a few days for the swelling, discomfort – pain – to present itself, so I went to the doctor (Northridge Internal Medicine at UVA)

Thanks to my wife’s insurance, I went to the doctor to get a service – consultation, x-ray, interpretation – that no one has any idea how much any of that costs. That aspect aside, I was reminded that experience matters, and that one’s pay should be commensurate with one’s experience and track record.

She examined me, contorted my wrist, asked about my pain, asked how I injured myself, and before she sent me for x-rays asked me to “do this.” “This” was using my hand to assist my standing up out of the chair. When I couldn’t do it she shook her head, pursed her lips and said, “The last one I saw like that was a fracture.” The key here was that she’d seen it before.

As a Realtor, I’d like to think that I’m more competent, professional and experienced than I was when I was a newbie Realtor seven years ago. In my required BS classes, I learned very little; however through my experiences – my mistakes, my successes, my near misses, I’ve learned an extraordinary amount of knowledge that is applicable to my business and to my clients. To be blunt, I’d like to be paid for that experience; but our current environment doesn’t allow for that.

Putting aside any preconceptions about attorneys, the Virginia law firm of Allen, Allen, Allen & Allen have recently been playing an ad that speaks to my premise:

One of the problems with the real estate industry is this- very rarely does (in)experience pay. Experience matters, but it rarely pays – for one major reason – inexperience pays so well.

I don’t have a palatable solution (yet) to propose, but I welcome suggestions and inspiration.

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From this month’s Abode section of the C-Ville Weekly, Erika Howsare dives into real estate blogs -

Locally and nationally, real estate blogs, forums and websites of all descriptions have proliferated and changed the industry, as buyers and sellers (and agents and brokers) have more fluid, flexible ways of getting information. In Charlottesville, someone getting ready to make a deal can bone up on buyer-broker agreements at Jim Duncan’s blog, watch a video entitled “How to sell your home (in black & white)” at Daniel Rothamel’s blog, or peruse an aggregation of gloomy national news mixed with skeptical takes on local listings by the anonymous authors of Real C-ville —The Bubble Blog.

…

Similarly, an agent’s blog—and more of those come along every month—is only one source about that agent; another, essential one is your own impression of her in person.

A real estate blog is a step in the vetting and interviewing process … soon I hope to post an RFP I received from a prospective client that highlights a level of diligence that should be taken by more consumers. Consumers and Realtors need to treat the client-professional relationship as such – a professional relationship. I expect the same diligence from a close personal friend as I do from someone I meet through my blog or one who is referred to me by another Realtor.

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25%. That’s my new prediction for the number of Realtors in the Charlottesville area who will drop out next year. Writing this post gave me the opportunity to re-read and reflect on this post from October of last year – Are you willing to martyr yourself to the industry? when I thought this year we would see a 15%-20% reduction in the ranks.

USA Today had an article last week notable not just for the information in the article but also the hatred and vitriol found in the comments.

•Real estate agents are fleeing the business. After steadily rising during the housing boom, the number of real estate agents fell by nearly 25,000 from December 2006 through December 2007, compared with a growth of 12,500 from December 2005 to December 2006, according to the Bureau of Labor Statistics. Overall employment of real estate agents dropped from 1.5 million in 2006 to 1.47 million last year.

•After seeing its membership swell 89% from 1998 to 2006 (hitting nearly 1.4 million), the National Association of Realtors saw its numbers slip 1.5% last year, to 1.34 million. In July this year, the NAR had 1.26 million members.

“Some members are saying there are too many Realtors out there who are bringing additional competition, and a shake-up is expected,” says Lawrence Yun, the NAR’s chief economist. “We do anticipate lower membership going forward since housing recovery is taking longer.”

First, Dr. Yun – the observation about “too many Realtors” is one that you made in March of this year, and it’s not one about competition, but professionalism (or lack thereof).

Taking gleeful joy in the misfortunes of others is unconscionable and confounds understanding. There is very real pain, fear and desperation in the Realtor community, just as there is in many parts of the American economy right now.

The cycle and the dropout is normal, necessary and painful. Many who are suffering – within the Realtor community and without – are friends, colleagues, mentors – who are experiencing very real fiscal and psychological pain.

2008

- 71 Realtors have had more than 10 sides this year*

- 206 have had more than 5 sides

- 448 Realtors have had between one and four transactions this year.

- ~545 have had none.

Unless you’re the one guy who sells five properties with an average sale price of about $6 million, having less than ten sides a year is not going to cut it. (See Transparency in real estate fees and More on transparency in Realtor fees)

Contrast those numbers with those of 2007 -

- 103 had more than 10 sides (31% fewer than last year)

- 287 had more than 5 sides (28% fewer than last year)

- 448 had between one and four transactions (I ran it twice)

- ~460 had none.

And 2006 -

- 152 Realtors had more than 10 sides

- 333 have had more than 5 sides

- 450 Realtors have had between one and four transactions this year.

- ~ 415 had none.

Transactional volume is down (but not gone) -

Even if I had had only five transactions so far this year, I would still publish these updates – better to attempt to keep the façade intact.

* Charlottesville, Albemarle, Fluvanna, Greene, Louisa, Nelson – from 1 January through 5 August.

Update 8/20/2008: As a result of a discussion on an Active Rain blog, a point of clarification: while I am a member of the Charlottesville Area Association of Realtors’ Board of Directors, my prediction is mine, and not necessarily reflective of the BoD’s opinions/predictions.

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And how does it matter to a consumer? A good question to ask your prospective Realtor is – what’s your reputation with your peers?

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Fines for grammatical and spelling errors, for not uploading photos, using the words “cute, gorgeous … honey stop the car” …. I’ll vote for Kevin Boer in a heartbeat (of course, I don’t have a vote that I know of).

Seriously. Why not? One more thing to talk about in September at Real Estate Blog Word in Vegas.

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The following is an account of a loan horror story recounted by a Charlottesville lender.

First, a solution:

What Realtors can do to avoid a similar scenario: Work with lenders who have successfully closed at least five loans in the past twelve months of the type they are proposing. Work with lenders who have a reputation for ethical conduct. Choose your lenders based on factors other than glad-handing, happy talk or willingness to buy you lunch.

Take note of last-minute loan blowups and share that information with your business associates and clients. (I know many Realtors already do this when their client is proposing use of an on-line lender about whom the Realtor has already heard horror stories.) There are plenty of good lenders who would be happy to competently handle your deal, and there’s no reason for lenders who blatantly abuse their industry partners and clients to be making money.

What Buyers can do: ask lenders for names of satisfied clients who did the type of loan they are considering. This is perfectly reasonable. Don’t buyers and sellers ask Realtors for testimonials from happy clients? (ed. note: one of my more favorite questions of late is, “tell me about one of your dissatisfied clients, and why they were so dissatisfied”)

We’ve never seen a lender hauled before a panel of their peers on ethics charges (as happens in the Realtor community) though there’s certainly been ample cause. That’s unfortunate, but forewarned is forearmed.

Now, the tale:

Buyer (happens to be first-time but that doesn’t matter) and Seller enter into a contract, after two Realtors spend the usual hours marketing, showing, driving, negotiating and doing paperwork …

Buyer is going to do an FHA loan. They’re so popular now, for good reason. Buyer is hooked up with a lender. Don’t know how they connected, whatever, but if it was his Realtor who referred him to the lender we hope she’s learned a lesson.

The lender is not FHA approved. He’s pretty sure he will be, soon, so he originates the loan. Home inspection, appraisal done and paid for. Commitment letter issued (hearsay, I didn’t see it). Two weeks prior to closing the lender apparently gets worried that this FHA approval isn’t going to come through. It likely never will.

He contacts at least two local FHA lenders and attempts to refer the deal to them. One of them turns it down flat and the other takes the application, runs it through his underwriting system and can’t get an approval.

The lender doesn’t notify the borrower or Realtors at this or any point. Now we get into hearsay, in italics.

Two days prior to closing the lender told the borrower that they didn’t qualify for FHA (they didn’t, but the lender didn’t even have the option. If they’d been an experienced FHA lender they’d have know he didn’t qualify). The rate went from about 6% to 7.75 or higher. Closing costs/payment also went way up.

This is the problem with hearsay but you get the idea. The lender had flipped the loan to FNMA/conventional, got what’s called an expanded approval, which has high rates and high PMI. The payment was at least $200 higher and this was an “affordable” home.

On closing day the listing agent went to the closing table with the sellers expecting to sign. They were at the table when they found out the buyer’s loan wasn’t going to close.

At that point one more FHA-experienced lender was called in and ran the loan through his underwriting system- it wasn’t approved.

The listing agent is out all her marketing time and expense. The seller has lost valuable marketing time and now has a stale listing if they didn’t before. The buyer’s agent is out all the hours spent driving around a client who didn’t qualify, negotiating, doing paperwork etc. The potential buyer is out appraisal fee, cost of home inspection, maybe more, and has given up the lease on his rental unit so doesn’t have a place to live.

Oh, also, the lender didn’t get paid his commission. He put all these people’s time and money on the line in the slim hope that he might get paid. They all got screwed by this industry partner. (Sorry for the salty language.)

This is an easy problem to avoid. There are a lot of lenders out there now who don’t have what it takes to manage the current market. They might not be able to do the loan and not even know it. They might be able to but not know how. I hate to see you guys lose time and money. We are all in the same boat. There are a lot of good lenders who can get deals closed in this lending environment and will tell you if it’s not going to work.

I hope you can make this into a cautionary tale to help your readers- buyers, sellers and Realtors. Let me know if you have questions or need a referral to the other lenders or Realtors involved. I’m not sure they’d talk but I’d hope they would, to help someone else avoid a similar problem.

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One of my favorite snippets from the conversation is this -

I would – but there is a very clear and important difference (between Realtors and attorneys) – they clearly disclose the entirely adversarial nature of their relationship.

On top of all that, any comparison of the ‘rules’ put down by the legal Bar – in VA certainly, and in most states – versus the state Realtor’s Associations, is huge. The difference alone in the barriers to access from a career standpoint – beginning with three years of real academic training – go a long, long way to ensuring a much higher set of professional standards.

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Last week’s article in the Daily Progress was good, but as I told the journalist at the time – there is so much more I wanted to go into that article, and newspapers are so limited by what they can offer in print. They deal in inches, and for better or worse, bloggers don’t have those limitations. With that preface, this is one of things that didn’t make it in the article due in part to space limitations – My advice to buyers in the Charlottesville area -

Choose the right representation. Choose the right buyer’s agent. Choose someone whom you trust and get along with and like – not just because you met them at an open house, or because they have a blog, or because they are your sister’s husband’s friend who is just getting started and needs a break. Choosing the wrong representation is not just not worth it.

A good (great) buyer’s agent is someone who will advocate 100% on your behalf – simple. Contrary to public opinion, a good buyer’s agent is focused on the client’s needs more than their own. If you feel that “your” Realtor is focused more on the “sale” than your best interests – tell him.

Going waaay back in the archives to 2005, citing a WSJ article -

“Finding a real estate agent is kind of like dating. You have a small window to make an impression and then you’re with that person for a long time.”

Here is my business philosophy when I work with buyers – I want to sell their house when they move. Every buyer client represents a minimum of three transactions -

1) The house they are buying right now.

2) That house when they move (everybody moves, even if “this is the last house I am going to buy”)

3) At least one of their friends or family when my clients proselytize for me

I work with Buyer-Broker agreements with my buyers for a variety of reasons – first and foremost because we negotiate my fee upfront, and I am free from the perception that I am not showing unrepresented sellers’ (FSBO) houses or those houses that are offering lower commissions in the MLS than many Realtors are used to. And – it formalizes the contractual relationship that I have to my clients and that my clients have to me.

You can find a sample (although a bit dated) Buyer-Broker Agreement here.

Updated – this is a current sample Buyer-Broker Agreement. Note that it takes two sections to warn/educate about Dual Agency.

My advice is this – do your due diligence. If you have questions about the process, what questions to ask (or if you have an experience you would like to share) please contact me anytime.

——–

And the coup de grâce with regards to what blogs have over print – here are a bunch of very relevant links to help you get started in your research:

Here are some questions to ask when hiring a Realtor, courtesy of Redfin.

Do you like/do Dual Agency? One of my favorite posts I have written about Dual Agency is this – Dual Agency – Who Benefits? —- The Realtor.

Representation isn’t free

How to Choose a Realtor

Great Questions for a Seller to Ask

Questions to ask your (potential) agent in Charlottesville

Steering Buyer’s Agents

Why Use a Realtor – Decoding NAR-Speak

Rolling the Dice with Buyers

Being Selective

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From yesterday’s USA Today (fingered by a client):

Lawrence Yun: Consumers need to find out what is going on at the local level and not necessarily take national headline numbers as a point of reference. Sellers tend to be more stubborn in facing the reality of the market, so people who really need to sell need to come down on prices, given the high inventory and seller competition.

…

USA TODAY: Does the national median home price need to fall a lot more before the housing market can get moving again?

Yun: Prices need to adjust as the market dictates. Another 10% fall in some markets could occur. However, I doubt prices will or need to fall in the vast middle America. Indianapolis, Dallas, Kansas City, Omaha are, if anything, underpriced markets.

Calculated Risk on the Case-Shiller index.

My take last week on the Case-Shiller index.

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In response to a question from a reader last week -

“Do Realtors have a Board of Ethics?”

Yes. Yes we do.

All REALTORS® pledge to abide by the Code of Ethics of the National Association of REALTORS®. The Code sets forth a REALTOR’S® obligations to their clients and customers, to the members of the public and to one another.

Local associations of REALTORS® are responsible for enforcing the REALTORS® Code of Ethics. The Code of Ethics imposes duties above and in addition to those imposed by law or regulation which apply only to real estate professionals who choose to become REALTORS®.

The Realtor Code of Ethics is here, and it’s nine pages long.

Start at the Virginia Association of Realtors site. I’d link to our local association’s site, but it’s an abomination – and it has the 2007 Code of Ethics rather than 2008’s version.

I have never sat on an Ethics Grievance Committee, but as a member of the local Realtor Board of Directors, I have seen the results of several hearings. I generally think that we’re too easy on ourselves.

Maybe as part of the National Association of Realtors’ Ethics campaign, we should also highlight enforcement measures.

Technorati Tags: ethics, NAR, realtor

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Maybe, depending on the outcome of this case in Arizona.

Glenn Melton thought he was buying the American dream for his daughter. What he got was a neighbor who launches into obscene tirades at any hour.

So Melton sued the man who sold him the house.

At issue is whether the neighbor’s behavior constitutes a nuisance that should have been noted on the “residential seller’s property-disclosure statement” that every home seller has to fill out.
…
Melton eventually asked the former owner to take the house back. When he refused, Melton sued.

Nathan Thinnes, the former owner, said that he wrestled with whether to disclose the neighbor’s problems but was told not to by his Realtor. (ed. note: bolding mine)

According to court documents, the Realtor denies giving that advice, so Thinnes sued him. And the neighbor and her mother, who lives with her.

Local and national real-estate attorneys are hesitant to comment about the case, partly because Melton and Thinnes are both executives in the real-estate business. (ed note: so what if they are? bolding mine again)

“Is she the ideal neighbor? No,” he said. “Would I want her living next to me now? No. But do I think it rises to the level of broadcasting to the world that you have someone with a disability living next door to you? I don’t think so.”

Melton disagreed.

“Look,” he said. “I don’t care why she’s a nuisance. She could be a neo-Nazi, or she could be a member of the Jackhammer Society.

“Whatever. It doesn’t matter why she’s a nuisance, it’s just that it’s a significant intrusive nuisance, and that’s what he needed to disclose.”

In all honesty, should the NAR step in and give advice?

Virginia’s Disclosure law says this:

2. The owner makes no representations with respect to any matters that may pertain to parcels adjacent to the subject parcel and that purchasers are advised to exercise whatever due diligence a particular purchaser deems necessary with respect to adjacent parcels in accordance with terms and conditions as may be contained in the real estate purchase contract, but in any event, prior to settlement on a parcel of residential real property;

I have been trained my entire career that the seller (and Realtor) are responsible for disclosing problems within the four corners of the property; this is a very wide-ranging case and article – read the whole thing. It’s a potentially sticky-wicket, as they say – what if the Realtors’ ethical duties to the clients and the public overlap?

Should the potential buyers have searched for Rotten Neighbors?

(tune in tomorrow for a post about Realtor ethics)

Technorati Tags: ethics, NAR, realtor

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Thanks to the monthly email newsletter from VAR. (Not everybody reads blogs?!) I know some members of the Virginia Real Estate Board have opinions; why don’t they share them now?

A sampling:

As a listing agent, how can I promise to do the best job possible for the seller, who hired me to protect his interest and sell his home for the best price and terms, then turn around under dual agency where I cannot give him any advice that would harm the buyer? It takes away the ability to negotiate on either party’s behalf. As the seller’s agent, if I think that the buyer is in love with the house and would come up $20,000 to avoid losing it, I am in a much stronger position to negotiate. As a dual agent, my hands are tied and I become a mediocre agent for both parties and truly feel I have been stripped of all my skills and have to keep tape over my mouth. I have to walk a fine line that serves no one except filling the agent and brokers pockets.
…
Sellers see right through greed and self serving agents.

Technorati Tags: dual agency, real-estate, realtor

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