OK, ready? Repeat after me… “NO”

Try it again…”NO”

That’s what you should be saying firmly when the bank/lender says or “demands” that you lower your commission on your short-sale listing.

That’s also what you should be saying firmly when the listing agent says that the bank “demands” that the commission be lowered and that you, as the buyer’s agent, have to “split the difference”.

Too many agents are letting banks get the best of them. I’ve said “no” several times and have never had a problem. There are plenty of other agents that have also said “no” and have not had a problem either.

Can you actually say “no”?

Yes, you can! And you should. If you haven’t already, check out Lem Marshall’s presentation on short-sales which covers what’s required and what’s not and what’s legal and ethical.

Will the bank kill the deal if you say “no”?

I’ve yet to hear of a bank not approving a short-sale over 1 percent worth of commission. If someone has, please let me know and I will stand corrected.

So next time the bank tells you that you have to cut your commission to almost nothing, just say “no” and move on to the next subject. You’d be surprised at how well that works…

- To achieve real success, should we be “interdependent contractors”?

- Who’s really in control?

- Is a pulse and a few hundred dollars being necessary to get a license the reason why consumers look down on us?

I can’t express my personal views or say it much better than Matthew Ferrara did in his post entitled The Consumer-Unfriendly Myth of the REALTOR Independent Contractor. (It’s long, but definitely worth the read)

Why is that? The one reason I keep hearing over and over again is, “I don’t have time because I’m busy selling real estate”.

If you’re a full time Realtor, it’s easy to work 12 or 14 hour days, five, six even seven days per week. And that doesn’t include continuing education, seminars, learning about new business practices, laws, etc. To make things worse, many of us struggle in the “time management skills” category to begin with.

But what if you found out that there were bills, laws, policies or strategic plans being discussed and voted on that would directly affect the way you do business? What if your local or state association did something that made your life harder as a Realtor? What if it was harder to sell more homes every year which directly affected your income and overall livelihood?

You’d want to say or do something about it, wouldn’t you? That’s why you…I…all of us can’t afford to not get involved and help make a change.

“Can I really make a change?”

Up until about nine months ago, I thought “no way.” I thought that associations were all set in their ways and that no one would care what lil-ol-me had to say. But after being on several committees on the local and state level, I can tell you that you associations do care about what you have to say and you can help make a change.

It’s not always an easy task and can be mind-numbing at times. Sometimes associations run into issues of red tape and politics. But that’s in any line of business including your own brokerage firm. But even with some red tape and politics here and there, change is made and things do improve. In fact, you may be pleasantly suprised at how quickly some of the decisions can be made and the changes implemented.

“So how much time do I have to devote in order to get involved?”

Local association committee meetings typically meet up for about two hours every month to two months. In-between meetings, you’ll probably spend an hour or so communicating with other committee members via email and checking out updates and giving input on projects in the works. If the committee you’re on has a really big project in the works, it might take up an extra hour or two in-between meetings, but that’s the most time you’ll spend from what I’ve seen.

State association committee meetings vary. Some are a few hours while others are one or two days long every few months. But if it’s longer than a day, VAR takes good care of you. They feed you (well might I add), provide a hotel room if you’re coming from across the state and they have free access to WiFi, fax machines, printers, etc. I’ve been at Strategic Planning Committee meetings at VAR and still managed to send paperwork back and forth and close deals during breaks, lunch and before and after the meeting. In fact, almost every time I go to a committee meeting at VAR in Richmond, I end up selling a home just before or while there.

“What about scheduling conflicts?”

Yes, committee meetings sometimes convene at not-so-convenient times. I’ve had to schedule showing property, home inspections and settlements around committee meetings or conventions. But if I can schedule those things around personal vacations or family events, why can’t I do it around a committee meeting? After all, what happens in the committee meeting will directly affect my well-being as a Realtor. If I don’t have a livelihood as a Realtor, there won’t be any vacations in the first place.

I’m not trying to convince anyone to take my word for it and join a committee meeting tomorrow. No one could have convinced me of that nine months ago either. But if you’re even somewhat interested, at least inquire more about it and talk to those who are involved to see what their personal experiences are. You can also contact your local or state association and/or the Chairman of a committee you’re thinking about joining to get more information.

You may be surprised to find out just how much of a change you can really make while making money at the same time.

Special thanks to Jim Duncan for the great discussion we had about this a while back.

Richmond is about 90 minutes away from Loudoun County (in northern Virginia). But the current condition of each local real estate market is completely different from the other.

Brick Smith recently posted his personal opinion and analysis of the Richmond area real estate market on his blog. His unofficial analysis and forecast are a bit dismal, although his forecast does not take into account that the housing market typically picks up in the spring.

On the other hand, about 90 minutes north of Richmond in Loudoun County, the current conditions are much more stable and the forecast more upbeat. Here’s an excerpt of a post I recently wrote on Loudoun Scene regarding the current state of the Loudoun real estate market:

“The rate of new properties coming on the market is decreasing (supply). Buyers are increasing in numbers and making a move after sitting on the sidelines (demand). The percentage of total listings that are foreclosure/bank-owned and short-sale properties has stabilized.

That’s less supply, higher demand and stabilization in the distressed property area - a winning combination.

So you see, it’s actually getting better, not worse. The worst is over with prices having already come down 20 to 40+ percent from the peak in August 2005. “The sky is falling mentality” that is prevalent today should have been around last year and in 2006 when it really was falling. But it’s not the case today. “

As you can see, the two markets are very different. While a Richmond agent predicts a staggering market, Loudoun’s market is stabilizing and showing real signs of improvement.

The saying “Real Estate Is Local” is very true and obvious in this and hundreds, if not thousands of other examples and comparisons. Every market is different and you have to be an expert in your local market to give consumers an educated and accurate response when they ask you the age-old questions “So what’s the market like right now in our area as compared to ______? And where’s it headed?”

Some of the things in the presentation that Lem covered were:

• The history of economics and lending in America, how credit markets work and why we’re in this mess.
• Prices may not be at the bottom yet. It may take another 12 to 18 months to get there.
• Knowledge is the key. Make sure you get everything out on the table regarding the seller’s financial and personal situation. You can not properly help them without knowing all the facts and their overall situation - past, current and future.
• Make sure you get the borrower’s permission, in writing, in order to publicize the fact that it’s a short-sale. You must have the seller’s permission to disclose personal and financial information about them, which is what you’re doing by publishing that it’s a “short-sale” or stating “subject to third party/lender approval”.
• Make sure that you correctly word the “subject to third party approval”/bank contingency. How you word this will directly affect whether you face potential issues in the future or not.
• If the bank says that they want the commission lowered from what you’ve agreed upon with your client, don’t give in so easily. Many Realtors in attendance said that they said “no” to the bank’s request and that the bank was okay with it.
• If the bank insists on lowering your commission, try asking them to counter at a higher price that covers both your and the Selling Broker’s commission.
• Remind the Selling Agent (Buyer’s Agent) that the process of approval by the bank can take 60 to 90 days, if not longer. This will help alleviate an upset agent and buyer down the line.
• Short-sales can be messy. Be prepared to do much more work than a traditional resale or even a foreclosure.

There were many other great points that Lem made that Realtors can use on a daily basis when dealing with short-sales. I recommend watching the video of Lem’s presentation once it’s up on the Dulles Area Association of Realtors’ web site sometime next week. I’ll publish a quick post when it’s up to alert everyone so you can go check it out.

This session focused around things such as gap analysis and drilling down the mission and vision statements. We also had a fourth group come in, brokers, for a panel discussion just like we had in last month’s meeting. They definitely gave us more insight and things to consider, but some of the core issues such as communication and engagement that we’ve heard from other groups was evident with the broker group.

Part of the gap analysis was grading ourselves. To do that, we had to come up with a way to measure our performance in an objective manner. Thanks to our facilitator, Duke Kuehn, we came up with a way to do that and the results were a reality check and crucial to what we have to address moving forward.

On some things, we totally hit the market, if not exceeded it. On others, we fell short. But the good thing is that we fell short on goals that most local and state associations are having a hard time with, including NAR, so it’s not just us. Some of those things were

• communicating with and engaging our members,
• the perceived value of VAR to its’ members (including local associations), and
• the perceived value of REALTORS® by consumers.

Overall, I’d have to say that we’re doing pretty well. But there’s always room for improvement and we’re well aware of that and will work to bridge those gaps.

I do have to commend VAR on one key point - they are definitely remaining flexible enough to quickly address current and future issues and trends affecting REALTORS® as well as consumers as they happen, if not ahead of time. This includes the market, emerging business models, emerging technologies and consumer and Realtor needs. Rather than being a 900 pound gorilla, VAR is acting like a small to medium size business that is constantly paying attention to the business climate and the needs of its customers and members.

The mission statement was also a topic of heated discussion. That’s one reason why we ran so far behind. Since all of the things VAR does over the next three to five years has to pass the mission statement test, it’s important that we get it right. And it has to take into account current and future trends, which is not easy. One of the items we addressed was more of a focus on consumers. Without them seeing value in REALTORS®, we’re all in trouble. Even NAR addressed that issue in their mission/vision statement and Strategic Plan:

“The National Association of REALTORS® is the business and public policy advocate for its members and the consumers they serve.”

This meeting helped us objectively look at what we do best and what we need to do better or start doing altogether. It sets the tone for the next three meetings which will focus on actually creating the Strategic Plan and holding itself accountable.

The next Strategic Planning Committee meeting is April 16 and 17. Look for the recap shortly afterwards.

But they don’t address some key points. Currently, there is no law that protects consumers from lenders that “bait and switch” by showing “X” dollar amount on the Good Faith Estimate, but end up charging “Y” (aka higher) amount come settlement, much to the dismay of the borrower.

Since the financing contingency has typically been removed well before settlement date, the buyer has the choice of either paying the higher amount or not settling. If the buyer doesn’t want to move forward with settlement, they will most likely be in default and lose their earnest money deposit, etc. Therefore, they really don’t have a choice and just end up paying the higher fees.

Personally, I don’t understand how mechanics are required to contact people when the repairs deviate from the initial estimate by more than 10 percent, but there is no such rule for lenders. Saving consumers $668 is a drop in the bucket compared to the amount that some lenders increase their closing costs by at the last minute.

HUD has also proposed changes to the HUD-1 Settlement Statement (see proposed changes). But the HUD-1 Settlement Statement repeats much of the same information listed on the Good Faith Estimate. They should worry about changing the laws surrounding holding lenders accountable to their Good Faith Estimates rather than spending time changing the HUD-1.

Plus, the HUD-1 Settlement Statement is not ready until the day before or the day of settlement. By that time, there’s very little a buyer/borrower can do to make changes to their loan or “shop around” for better terms or a new lender.

Though consumers surely appreciate what HUD is trying to do, they will not be protected much, if any more than they are today. Personally, I’d rather pay the $668 and have a guarantee that the loan will close on time and that the lender fees will be the same as listed on the Good Faith Estimate.

“Most agents are not utilizing technology efficiently.We had a young agent and he did an excellent job with marketing our town home. We ended up getting three dozen offers. He also uses BlackBerry and a few other tech gadgets which many agents simply don’t use or cannot afford or whatever.”

Another reader commented,

“I have to admit that old school agents make me nuts. Half the time they come at me with a couple NAR talking points, not realizing that us younger buyers are running the numbers and doing the research online. It makes them sound archaic and I always wonder if they really think we’re that dumb?”

The one comment that really hit home for me and that I definitely agree with was,

“The future of real estate will be this: Agents will offer their ’services’ in a tiered format - a menu of services for a price. The bulk of their ‘business’ will be in the negotiating, paperwork, etc. at the end of the sale.

The education process, visiting properties, etc. will be done ONLINE by buyers. They will do all the agents’ work, and will use the agent only in the end, for the one part of the transaction that still makes even experienced buyers/ sellers uncomfortable - the negotiations, and the mounds of paperwork. THAT will never be able to be done online,and even experienced buyers don’t feel comfortable doing it.

Is that bad? No. It will just change the way real estate is bought and sold. Just like travel agents. One can still buy a ticket on a plane, or book a vacation or use a travel agent. BUT, their business model has seriously changed in the past 10 years. Real estate will be exactly the same way.”

The real estate industry needs to pay attention to posts and comments such as these because they reflect the consumers’ growing perception of an agents’ value (or lack thereof); what they expect from the real estate transaction (regardless of how long an agent has been doing it a certain way for); and where real estate is headed in the very near future.

To find out what they are in your area, click here and select your state and type in your county.

Note that the new limits are only for loans obtained on July 1, 2008 or later and that the loans must be funded (you must close) no later than December 31, 2008.

Fannie and Freddie’s federal regulator, the Office of Federal Housing Enterprise Oversight (OFHEO), signed off on the agreements. OFHEO Director James Lockhart said he would be “closely monitoring” the rollout of the new standards over the next nine months to make sure they do not have “unintended consequences.” (Click here for OFHEO press release)

The standards established under a “Home Valuation Code of Conduct” will prohibit mortgage brokers and real estate agents from selecting appraisers. When underwriting loans, lenders who want to do business with Fannie and Freddie will be barred from using appraisal reports prepared by in-house appraisers, and most affiliated companies or real estate settlement services providers as defined under the Real Estate Settlement Procedures Act (RESPA).

There are some exceptions to the rule. Lenders may use reports obtained through affiliated appraisal management companies, but only if their ownership interest in the company is 20 percent or less, and the company is operated independently and the lender has no involvement in its day-to-day business operations including selection of appraisers.

And not all broker in-house appraisers will be out of a job. Lenders will still be permitted to use in-house appraisers to order appraisals, conduct reviews or other pre- or post-funding quality control, develop internal automated valuation models, and prepare appraisals in connection with loan workouts.

Lenders will have until January 1, 2009 to include assurances in their representations and warranties that mortgages originated after that date conform to the new standards.

(Cross post from real/diaBlog)