Good Versus Bad Debt – Is Real Estate Debt OK?

Here’s a very basic conversation about “Good Debt” versus “Bad Debt”

Is there such a thing as “good debt”? Years ago, I considered “good debt” to be an oxymoron.

This good vs. bad debt conversation comes up a lot in real estate conversations. Especially for investors just starting out. And, typically, understanding “good” debt has proven more difficult for women (sorry girls). We, it seems, are much more concerned about paying the bills today for our home and our children. After all, doesn’t most of society tell us that debt is bad? So, how is some of it good? And why?

My husband and I argued about “good debt” vs. “bad debt” for two and a half years before I finally got it (and by “it”, I mean I finally understood his argument). I wanted no debt and was absolutely NOT interested in finding something called private money lenders. Why in the world would we want even MORE people – besides mortgage companies – to owe money to?!?

But, ultimately, I became convinced. “Good debt” is a real thing, and not just an oxymoron. I learned about something I had not previously understood – Leveraging.

Here’s one definition I found for leveraging: “using borrowed capital for (an investment), expecting the profits made to be greater than the interest payable.”

Yes, “profits made to be greater than the interest payable” means you can pay back the lender and still have profits (money) left for yourself. If you do this once, it’s a wonderful thing. If you do this ten times, it can be incredible. So, done right, taking on more “good debt” can increase your own long-term profits.

Not all debt, naturally, leads to profits – not a big screen TV or another car, but investment debt done right definitely can. Here’s a very basic way to look at it:

Example 1:

Say you personally have $100,000 cash. You can purchase one house for $100,000 and get $1000 per month rent for it.

Example 2:

Or, you buy ten $100,000 houses, putting $10,000 down for each, and get $1,000 per month rent from each house. Yes, you have debt to pay to the borrower on each one, but you also have profits left for yourself on each one.

  • You only need $100 profit left on each to still receive your $1000 per month income.
  • Plus, you have someone else paying off those mortgages.
  • Plus, you receive tax write-offs on the interest you pay to your lenders.
  • You receive additional tax write-offs on the depreciation on those properties.
  • Over time, your tenants, not you, pay off the mortgages.
  • You end up with ten houses each paying $1000 per month rent. Rather than the original one house paying $1000, you now have ten houses paying $1000. And you still only paid out your initial $100,000 for ten times the reward.

Now THAT’S leveraging!

Another important fact when purchasing real estate is that you have an asset against your debt. It’s not like borrowing for a bigger TV or even for a car where the purchase has little to no value. In fact, those aren’t assets but liabilities. With real estate, if circumstances go awry, you have the option to give the asset to the lender to satisfy the debt. A much safer deal for everyone.

Begin to see this “good” debt is as an investment in your future. The important thing is that you must buy right. Be sure to buy at a deep discount, never pay full retail. That leaves plenty of room to maintain value even if the market and property values drop (remember 2008, 2009 and 2010?).

Does this make you think of real estate debt differently? What can you add?

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Real Estate Agent Slogans

Catchy taglines are everywhere in advertising. Whether they rhyme, or they inspire, or they create a memorable image, taglines are something every advertising agency works hard to craft. How many of us know, “Like a good neighbor” or “Just do it”? While you might not create a slogan as memorable as those, you should be able to come up with something that your local clients will always think of. Need a little inspiration to get started? Here are some suggestions for slogans and ways to get the creativity rolling.

When you do come up with a slogan, you need to use it throughout your advertising and on your website. That way, people will be faced with the association frequently and they will be better able to keep your name and the slogan together.

Your slogan should be short and sweet. Try your best to keep it under eight words. Anything longer will just deter people instead of drawing them in. It should also make sense for the brand you are creating.

One thing you can do is come up with a rhyming slogan. Case in point – a Realtor named Scott Geller tagged “The Home Seller” after his name and because it rolls off the tongue so smoothly, it has become all one phrase. And, that makes it easy to advertise. His word of mouth campaign keeps his advertising costs low.

Your slogan should make a tug on the heartstrings, too. You are taking part in one of the most important events in a person’s life. By letting your customers know what you can do in terms of customer service, your slogan will help quickly convey what you can do. Consider something like, “Jane Smith – Helping Your Family Make the Right Move”.

Avoid any slogans that are bland or generic. They won’t work to set you apart from your competition, and they might even work against you. If your slogan is generic, your potential clients might think you are, too, and that you won’t be the best agent they can find. Think about something like, “I’ll take the stress out of your home buying experience”, or “Call the Carson City condo specialist”.

You can also consider your location for your slogan. When you add in your place, it not only helps make you the personal expert for someone, you also boost your search engine ranking.

Creating an image in your potential client’s mind is an effective slogan, too. Assuring your client you can solve the mystery of home buying or be their personal navigator makes that slogan unique and memorable at the same time.

If creativity is still escaping you, you can contract this process out and hire a professional. Some will even blend the slogan into your total advertising plan, and not charge you too much for it.

Now, if you come up with a slogan and you test it on your friends and family but you receive a negative reaction, be ready to set that slogan aside and pick something else. You should also not take it personally. Try out another one and keep going until you do find one that is well received.

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Positioning Strategies For Real Estate Agents

Just recently I was asked to do a talk for my good friend and co-author

of our best-selling book in Singapore titled Get Rich Now: 15

Strategies from a Self-made Millionaire, Dr Dennis Wee. (Dr Wee is one of

Singapore’s most celebrated entrepreneurs. Despite not having completed his

high school education, he managed to start and build up his own real

estate company, Dennis Wee Group, to become of Singapore’s leading real

estate companies generating S$3.8 billion worth of sales in 2006.)

He wanted me to share some marketing secrets with his real estate

agents and I was more than happy to do so because I believe there’s so much

more that agents can do to position, brand and market their services.

Sadly, most agents, whether in real estate or financial services

(insurance) or any other industries, tend to see themselves just as a

salesperson. This perception of themselves is limiting their growth and income!

By thinking that they are just salespeople, they don’t see the

possibilities of growing their careers into full-fledge businesses. There are

so much more benefits for someone to think big and build a big business,

compared to just existing, and making a living. Donald Trump said: “If

you’re going to be thinking, you might as well think big.” But that’s

another topic for another session.

Here, I’m going to show you some detailed examples of how an agent can

differentiate himself using some simple positioning and branding

strategies that I have used with other clients to great success.

Many people perceive that being an agent in any industry is like being

a salesperson. Someone who is always competing with all the other

thousands of salespeople in the industry. To a certain extend it is correct.

Those other agents are also looking for the same deals that you are. It

is a matter of who gets the deal first. So they are relentlessly going

out there to cold prospect.

Now, I am not a fan of cold prospecting. To me, cold prospecting is

like bashing your head against the wall, hoping it will crumble before you

start bleeding… most people just end up being very disappointed. Why do

you think new agents don’t last long? I strongly suspect it’s because

they realized that their heads can’t go against the wall.

But there are ways to turn the table around. In my talks I like to ask

the audience: Would you prefer to work hard and look for prospects, OR

would you prefer to let your prospects seek you out?

The answer is obvious.

But more than just having less work and an easier time, there are

deeper psychological advantages to being able to let your prospects seek you

out instead of you cold prospecting them. Simply said, when you seek

someone out, you will be open to the person’s ideas, advice, expertise.

That is the reason you seek him/her out in the first place–to get expert

advice.

There won’t be the wall of resistance you’ve grown accustomed to when

you cold prospect. In fact, now it’s them who are jumping over hoops to

seek you out in your domain. Man, it’s always exciting to talk about

this!

Believe me, it’s a whole new paradigm. Imagine you becoming a celebrity

overnight and people are just doing everything they can to get in touch

with you. Think of stars of reality shows like Survivor and American

Idol… It is that powerful!

So how can you achieve that?

Let’s look at a typical scenario:

You have probably have opened your letter box day after day only to

find it stuffed with piles of flyers from various real estate agents. Just

take a closer look. You will realize that all of them claim to be the

“specialist” in the area. Now if everyone is a specialist, then does it

matter who you call? Absolutely NOT!

“But I’m different from the rest. I have more experience, quality,

etc…” you protest.

Let me be upfront. It doesn’t matter who you are or what your

background is. If the prospects don’t recognize that straight away, you are just

like everybody else. No matter how different you think you really are.

Repeat after me: If you are like every-body else, you are a no-body.

Remember: It’s all about their perception, not yours.

So instead of being just another area specialist, be different. So far

I’ve not come across any agent who positions him/herself as the

specialist to serve “first-time home buyers”. Do you think that is powerful?

Absolutely!

First-time home buyers are inexperienced. They don’t know what to

expect, what the whole buying process is going to be like, how long will it

take, what possible hiccups might occur, etc. They are in a place where

they don’t know what they don’t know. Do you think they have different

needs/concerns compared to those who have bought a house before? Of

course! If you are able to gain their trust, do you think they will look

for someone else?

The point is this: you have the information that first-time buyers are

looking for (in fact all real estate agents should know these

information). But by letting them know that you are the expert who can guide

them through the whole process safely, will in itself, earn you a closed

deal.

You might need to make some minor changes in the way you do things,

such as explaining the buying process more thoroughly, going through the

nitty gritty details that you won’t normally need to with experienced

buyers, etc. But all these will help to cement your positioning and

branding as the expert to serve first-time buyers. And once your branding

gets out, you will be busy with so many referrals for other first-time

buyers. Is the first-time buyers market huge enough for you?

Once you have established your branding, it is easy to market your

services. You can easily get the publicity that once used to be impossible

for you. If the media wants to get an opinion on what first-time buyers

think about a new housing policy, who do they look for? They will

interview the expert (you). And after appearing in the media, you will have

gained even more credibility. Can you see how this will snowball into

your profits?

It all starts with creating a powerful positioning, branding and

marketing strategy that is suitable for you.

What other positioning can differentiate you? How about:

o The property investments expert (investors love to work with those

who understand their investing needs, someone who is not just another

agent); or

o Divorce cases specialist (they definitely have different needs as

compared to the usual buyers); or

o Downgraders or upgraders; or

o Serve only those looking for luxurious, high-end houses worth $XX

amount and above (your service must of course reflect that); and

o Many more!

As you can see, it is critical to create a powerful positioning to get

your prospects to start looking specifically for you. I assure you I’m

not an expert of the real estate industry. But I’m an expert in

positioning, branding and marketing. These same principles can be applied in

other industries, such as the financial services industry, perfectly

well.

So start positioning yourself today!

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The Duty Of Confidentiality In Real Estate

In any Listing Agreement there is a point in time when the agency relationship ends.

A Listing Agreement, as it is widely known, is none other than a contract between the rightful titleholder of an interest in land (the ‘Principal’) and a duly licensed real estate firm (the ‘Agent’), whereby the firm stipulates and agrees to find a Buyer within a specified timeframe who is ready, willing and able to purchase the interest in land that is the subject matter of the contract while acting within the realm of the authority that the Principal confers onto the Agent, and wherein furthermore the titleholder stipulates and agrees to pay a commission should the licensee ever be successful in finding such Buyer.

As in all contracts, there is implied in a Listing Agreement an element which is commonly know at law as an ‘implied covenant of good faith and fair dealings’. This covenant is a general assumption of the law that the parties to the contract – in this case the titleholder and the licensed real estate firm – will deal fairly with each other and that they will not cause each other to suffer damages by either breaking their words or otherwise breach their respective and mutual contractual obligations, express and implied. A breach of this implied covenant gives rise to liability both in contract law and, depending on the circumstances, in tort as well.

Due to the particular nature of a Listing Agreement, the Courts have long since ruled that during the term of the agency relationship there is implied in the contract a second element that arises out of the many duties and responsibilities of the Agent towards the Principal: a duty of confidentiality, which obligates an Agent acting exclusively for a Seller or for a Buyer, or a Dual Agent acting for both parties under the provisions of a Limited Dual Agency Agreement, to keep confidential certain information provided by the Principal. Like for the implied covenant of good faith and fair dealings, a breach of this duty of confidentiality gives rise to liability both in contract law and, depending on the circumstances, in tort as well.

Pursuant to a recent decision of the Real Estate Council of British Columbia (http://www.recbc.ca/) , the regulatory body empowered with the mandate to protect the interest of the public in matters involving Real Estate, a question now arises as to whether or not the duty of confidentiality extends beyond the expiration or otherwise termination of the Listing Agreement.

In a recent case the Real Estate Council reprimanded two licensees and a real estate firm for breaching a continuing duty of confidentiality, which the Real Estate Council found was owing to the Seller of a property. In this case the subject property was listed for sale for over two years. During the term of the Listing Agreement the price of the property was reduced on two occasions. This notwithstanding, the property ultimately did not sell and the listing expired.

Following the expiration of the listing the Seller entered into three separate ‘fee agreements’ with the real estate firm. On all three occasions the Seller declined agency representation, and the firm was identified as ‘Buyer’s Agent’ in these fee agreements. A party commenced a lawsuit as against the Seller, which was related to the subject property.

The lawyer acting for the Plaintiff approached the real estate firm and requested that they provide Affidavits containing information about the listing of the property. This lawyer made it very clear that if the firm did not provide the Affidavits voluntarily, he would either subpoena the firm and the licensees as witnesses to give evidence before the Judge, or he would obtain a Court Order pursuant to the Rules Of Court compelling the firm to give such evidence. The real estate firm, believing there was no other choice in the matter, promptly complied by providing the requested Affidavits.

As a direct and proximate result, the Seller filed a complaint with the Real Estate Council maintaining that the information contained in the Affidavits was ‘confidential’ and that the firm had breached a duty of confidentiality owing to the Seller. As it turned out, the Affidavits were never used in the court proceedings.

The real estate brokerage, on the other hand, took the position that any duty of confidentiality arising from the agency relationship ended with the expiration of the Listing Agreement. The firm argued, moreover, that even if there was a duty of continuing confidentiality such duty would not preclude or otherwise limit the evidence that the real estate brokerage would be compelled to give under a subpoena or in a process under the Rules Of Court. And, finally, the realty company pointed out that there is no such thing as a realtor-client privilege, and that in the instant circumstances the Seller could not have prevented the firm from giving evidence in the lawsuit.

The Real Estate Council did not accept the line of defence and maintained that there exists a continuing duty of confidentiality, which extends after the expiration of the Listing Agreement. Council ruled that by providing the Affidavits both the brokerage and the two licensee had breached this duty.

The attorney-client privilege is a legal concept that protects communications between a client and the attorney and keeps those communications confidential. There are limitations to the attorney-client privilege, like for instance the fact that the privilege protects the confidential communication but not the underlying information. For instance, if a client has previously disclosed confidential information to a third party who is not an attorney, and then gives the same information to an attorney, the attorney-client privilege will still protect the communication to the attorney, but will not protect the information provided to the third party.

Because of this, an analogy can be drawn in the case of a realtor-client privilege during the existence of a Listing Agreement, whereby confidential information is disclosed to a third party such as a Real Estate Board for publication under the terms of a Multiple Listings Service agreement, but not before such information is disclosed to the real estate brokerage. In this instance the privilege theoretically would protect the confidential communication as well as the underlying information.

And as to whether or not the duty of confidentiality extends past the termination of a Listing Agreement is still a matter of open debate, again in the case of an attorney-client privilege there is ample legal authority to support the position that such privilege does in fact extend indefinitely, so that arguably an analogy can be inferred as well respecting the duration of the duty of confidentiality that the Agent owes the Seller, to the extent that such duty extends indefinitely.

This, in a synopsis, seems to be the position taken by the Real Estate Council of British Columbia in this matter.

Clearly, whether the duty of confidentiality that stems out of a Listing Agreement survives the termination of the contract is problematic to the Real Estate profession in terms of practical applications. If, for instance, a listing with Brokerage A expires and the Seller re-lists with Brokerage B, if there is a continuing duty of confidentiality on the part of Brokerage A, in the absence of express consent on the part of the Seller a Realtor of Brokerage A could not act as a Buyer’s Agent for the purchase of the Seller’s property, if this was re-listed by Brokerage B. All of which, therefore, would fly right in the face of all the rules of professional cooperation between real estate firms and their representatives. In fact, this process could potentially destabilize the entire foundation of the Multiple Listings Service system.

In the absence of specific guidelines, until this entire matter is clarified perhaps the best course of action for real estate firms and licensees when requested by a lawyer to provide information that is confidential, is to respond that the brokerage will seek to obtain the necessary consent from the client and, if that consent is not forthcoming, that the lawyer will have to take the necessary legal steps to compel the disclosure of such information.

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7 Things, Your Real Estate Agent, Owes You

The behavior, ethics, and guidelines, for licensed, real estate agents, is described, in considerable detail, by, both, each individual's state, as well as one's local real estate board. One owes his client, fiduciary responsibility, discretion, ethics / integrity, and the finest, personal service, and representation! All real estate agents are not created equal , when it comes to, how seriously, and thoroughly, they consider these necessities. One should treat these, as, things – to – do, instead, of merely, as loose guidelines, because, they are, the very least, anyone hiring an agent, deserves, because, in most cases, one's house, represents their single – biggest, financial asset. This article, therefore, will attempt to, briefly, review, consider, examine, and discuss, 7 things, which are essential.

1. Integrity: An agent's integrity must be genuine, and absolute, in each, and every detail! This requires a commitment to one's client, and placing them, and their best – interests, ahead of any personal agenda, and / or, self – interest!

2. Ethics: It's important for agents, to thoroughly, read, and be familiar, with each, and every, ethical responsibility, described, in the Realtors Code of Ethics, as well as state real estate law! This means, an agent must focus, on what's best for his clients, instead of his personal best – interest!

3. Privacy: There must be a chemistry, and trust, between a homeowner, and his chosen representative! It is essential to respect client's privacy, in an absolute way! Any financial. economic, or personal information, shared, must be kept, private, and one must respect this privacy, etc.

4. Respect: There must be mutual respect, as well as trust, and a willingness to tell the homeowner, what he needs to know, not just what he wants to hear! Agents must respect the homeowner's time, and realize, this period of time, is, often, a stressful, trying one! One should, also, realize, an agent needs his client's respect, if the finest results can be achieved! The best approach, is using respect – based, teamwork!

5. Marketing plan: Since, no two homes, and no two individuals, are exactly the same, a customized, marketing plan, must be created, and used! Know, and understand, all aspects, and considerations, in order to proceed, effectively, and, on, the same – page!

6. Necessary adjustments: Often, a price adjustment, and / or, tweaking a plan, or process, is needed, mid – stream! This requires, mutual respect, understanding, and articulating a message, clearly, and, to, the point!

7. From listing, to closing: When one hires an agent, the process, and responsibility, must take place, consistently, from listing, to the closing! You need to be represented, by someone, who, will hold – your – hand, throughout, and ease the overall process!

Homeowners, and agents, should understand, what an agent, needs to provide, effectively, efficiently, consistently, and professionally! When the personal chemistry, and discipline, are there, the process, works, best!

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SALT, And The Impact, On Real Estate

Until, the discussion, about some of the components, of the tax reform legislation, enacted, at the end of 2017, few people, paid much attention, to what is often, referred to, as, SALT, or state and local taxes. This provision, appears to favor, many of the smaller states, where there are, often, lower, income and property taxes, etc, over, those, which may have higher taxes. Was this a coincidence, and mere, by – product, or, a concerted political effort, to punish, states, which, generally, vote against the party of this President? This article will attempt to, briefly, consider, examine, review, and discuss, the impact of this limitation, on the ability to deduct, local and state taxes, on various aspects of real estate.

1. Effects higher – priced, and, taxed, houses and properties, more: This provision has impacted, those owning higher – priced, and taxed houses, and properties, to a larger degree, than other homes. Since the limit (or, cap) on how much one is permitted to deduct, is only $! 0, 000, it means, if a state, has both, income taxes (state, and / or local), as well as higher real estate taxes, the owners, lose any potential benefit, from the so – called, tax reform. The higher the differential, the greater the impact!

2. Makes buying harder, especially, for, first – time homeowners: These provisions make it far more challenging, to home buyers, especially, first – time homeowners! When there is less tax benefit, the overall benefits of owning a house, versus, renting, is severely reduced! The lower the tax benefit, the net effect, is, often, severely increasing the overall costs of buying, and owning, a home, of one's own!

3. More susceptible, when mortgage interest rates, increase: Obviously, when mortgage interest rates, rise, it means, someone has a larger, monthly responsibility. When this is combined, with higher taxes, and limited tax savings, the probability of effecting the real estate market, and pricing, becomes, potentially, pronounced!

4. Perceptions: The tax legislation, appears, to benefit, those who, do not itemize, at the expense, of those, who do! Perhaps, the biggest challenge, may be, how potential buyers, perceive it, and whether, it affects, the price, they are willing, and able to pay, for a home. Obviously, in true, net terms, if one can no longer deduct, all, of the state and local taxes, the advantage of home ownership, is reduced, and, many taxpayers, suffer, to a far greater extent!

What we need, is a fair system, where there is more understanding, than, there might be, under present circumstances! Greater involvement, and fairness, should be, the rule of the land!

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6 Commercial Real Estate Myths

There are a number of misconceptions floating around in the market when it comes to commercial real estate and it becomes important to identify them. These misconceptions can deter investment and risk-taking behavior that is required in this market to be a successful investor.

You need considerable funds to start

This is one of the most common misconceptions in the real estate industry, you don’t need to be swimming in funds to invest in your first property. Banks don’t only look at your balance to approve your funding, they look at the potential profits of your deal as well. The more appealing the deal is the more likely you will be to get your funding, however, you don’t need to rely on just your banks there are always private money lenders who’d be willing to help out if you check out.

The numbers are too hard

These days there are plenty of software options in the market to do the legwork for you, you just need to know your figures and the software will compute the rest for you. The rest just boils down to you being able to interpret the figures to make informed decisions when it comes to your real estate needs.

Most commercial properties are advertised

Contrary to popular belief most of the available commercial properties aren’t listed in newspapers nor will you find any bandit signs advertising the properties of your desire. You will need to consult a real estate broker who has considerable contacts among investors and property owners alike to get a comprehensive list of all the available properties in the area of your interest.

Managing commercial property is much more of a hassle than residential property

Managing a property is no joke, but the hitch is that the proceeds with commercial properties is much more than that of residential properties. So one can afford to hire a management service that operates in your stead and takes care of all the management aspects of your property, including using their comprehensive list of vendors.

Good deals are difficult to find

No matter the market situation it will always be possible to find a good deal in the real estate market, there are always certain types of properties and other factors that make this reality a possibility. All this is dependent on you making a reasonable effort to make the deal happen though.

A single agent can fairly represent both sides

An agent will invariably have the interests of the landlord at heart and not the investor or the buyer, the agent will always have vested interests and therefore act as a dual agent in a way. So it’s always better to hire your own agent to represent your interests.

These are some of the common myths surrounding the commercial real estate industry.

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Real Estate Agent Assistant Agreement

Using an assistant agreement is vital when hiring a real estate assistant. It should describe the working relationship between you and the assistant. The first thing you should consider is whether he or she is an employee or working as an independent contractor. If you choose to have an employee you have to deduct taxes, social security and unemployment insurance from their pay. This involves a lot of record keeping on your part plus the added expenses you incur by having an employee…

So after consideration most agents that hire assistants choose the independent contractor status. You do not have to do any of the withholding. You just have to provide a 1099 form. There is no salary only a commission or fee as payment or services rendered payment. This fee will also be deductible on your taxes as an expense.. It would be wise to check with your accountant to see how to handle the payment schedule.

You should hire an assistant that has an active real estate license because if they don’t have one it will limit them to doing only what an unlicensed person can do. This will make a very big difference because there are many tasks that need a licensed agent to perform. Some of the requirements you should consider when interviewing an assistant would be having computer skills in programs such as Microsoft word, excel or comparable programs. If they don’t have a laptop computer you may have to provide one. Although it’s an expense the investment will prove well worth it.

Let’s talk about what else an agreement should do.

  • Define the work hours
  • Define commission or payment services
  • Explain what duties you expect from an assistant
  • Assist with showings
  • Assist with market value reports
  • Go on market value report appointments with you
  • Set Appointments
  • Do open houses
  • Record keeping
  • Mailings
  • Hand out flyers
  • Place signs for open houses
  • Make phone calls on your behalf
  • Prospecting for new business
  • Review the daily updates on the MLS
  • Preview new listings
  • Meet all of your clients and customers
  • A team player attitude

You must determine a payment schedule of how much, when and how often the assistant should expect payment. Your business growth should have a direct effect on commission increases for the assistant. A confidentially clause is important to have in your agreement. The assistant must know that what goes on between both of you stays confidential. Having this all on paper will set the guidelines. Your assistant will know their job description and their duties.. A real estate assistant agreement should protect both parties.

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Better Real Estate Results: 7 Steps, Homeowners Should Take

When one decides, it’s time, to sell his house, the smartest approach, is, to proceed, with a time – tested, well – considered, process, focused on achieving the most desirable objectives! For most, this includes, obtaining the best possible price and terms, in the shortest – period of time, with a minimum of hassle/ stress! In order to make this, often – stressful process, and transaction period, more stress – free, and meaningful, based on my, over a decade, as a Real Estate Licensed Salesperson, in the State of New York, I have created, my, RICH IDEAS, 7 basic steps, homeowners should take, to get the finest, possible results, etc. With that in mind, this article will briefly, consider, examine, review, and discuss, these steps.

1. Interview potential agents: Since, in most areas, there are many licensed, qualified, real estate agents, homeowners, should begin the process, by thoroughly, interviewing potential representatives, and determining, who might be best, for them. Since, for most, the value of their house, represents, their single – biggest, financial asset, doesn’t it make sense, to find someone, to represent your best interests, with the necessary skills, assets, abilities, and attitude, to make a significant difference, for the better?

2. Hire: Once you’ve decided, who might be, best for you, hire that individual, and thoroughly, discuss, your mutual expectations, especially, in the areas of marketing plans, open – houses, showings, and communication. Be certain, to be, on the same page, from the onset!

3. Marketing plan/ strategy: The quality of the marketing plan, is a significant factor, in the overall strategy, which will direct, the best approach, to achieving the finest quality objectives!

4. Teamwork: This process works best, and most efficiently and effectively, when a homeowner, and his chosen agent, are consistently, on the same – page, and do, what’s in the best interests of getting the objectives done! This teamwork, often, makes a huge difference, and the more, each, knows his responsibilities, and expectations, the finer the overall result!

5. Prepared for showings: Homeowners must agree to, at all times, while the house, is, on the market, to ensure, it’s ready, and prepared, for showings, even, on the shortest – notice. The reality is, the easier it is, to show, to the best of its potential, the finer the inevitable result!

6. Pay attention: Be certain to pay attention, to as many details, as possible, if you hope, to achieve your goals and objectives!

7. Endurance: Homeowners must realize, the transaction period, often, requires significant amounts of endurance, to overcome the stresses, and strains, which often, come – up!

If you want the best possible, real estate results, following, these 7 steps, should be helpful! Are you ready, willing, and able, to do, your part?

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History of Real Estate Agency Relationships

In the beginning, real estate brokers were known as middlemen and optioneers. Back then, the customary practice was for a middleman to know about a property for sale, but to keep it secret from other middlemen. It was difficult for these middleman to collect a fee for their services so they would resort to tactics that were not always in their seller’s best interest. Optioneers, on the other hand, were usually more successful in collecting their fees because they would tie up the seller’s property on an option to purchase, sell the property to a buyer at a price over the option amount, pay the seller the option price, and then pocket the rest.

The early real estate brokerage business was loosely organized and used methods of brokering that were often dishonest, subject to fraud, and that took advantage of sellers and buyers. Eventually, a newer concept with the real estate broker being an agent of and owing a fiduciary duty to the seller and receiving payment for his services was developed. This new concept forced the seller and broker relationship to a higher level of service and duty. It also allowed brokers to list property for sale using contracts. These contracts are what we now refer to listings. The earlier forms of listings we called open listings. The open listing is a type of non exclusive listing contract authorizing a real estate broker to offer a property for sale, find a buyer and get paid for services upon the closing of that transaction.

Other brokers could also have open listings for the same property, but only the broker who actually found the buyer would receive a commission. In addition, no broker would get paid a fee if the seller sold the property. The open listing discouraged cooperation between brokers, since each broker could obtain their own open listing. To solve the open listing problem, the exclusive agency listing became popular.

The exclusive agency listing is a type of listing contract wherein the seller offers only the listing brokerage compensation if the buyer is procured through the brokerage’s efforts or the efforts of other real estate brokerages. This means that in certain situations, such as For Sale by Owner, the listing brokerage may not receive compensation when the property is sold. In the exclusive agency listing, the listing brokerage or another brokerage working with the listing brokerage must procure the buyer in order to have a claim on compensation.

The exclusive agency listing encourages competing brokers to find buyers for listing, since the listing brokerage pays the selling brokerage’s fee. However, the seller still does not pay a fee when a seller finds the buyer. The exclusive agency listing eventually gave rise to the exclusive right to sell listing.

The exclusive right-to-sell agreement, the listing brokerage is offered compensation in the event of a sale regardless of who procured the buyer. The exclusive right to sell listing guarantees that the listing broker will get paid a fee, even if a competing broker or the seller sells property. It provides the most protection for the listing broker and is considered in the best interest of the seller because the listing brokerage will put effort and resources into marketing the property, since a commission is guaranteed during the term of the agreement.

Even after the exclusive right to sell listing became popular, there was little cooperation between brokerages, since a buyer who wanted to buy a specific property would have to deal with the broker who had exclusive listings of interest. It was also quite clear to all parties in that the broker represented the seller and that the buyer had no representation.

By the 1950s there was pressure for more cooperation between brokerages. As a result, a broker working with a buyer would contact competing brokerages to to learn of their inventory and possible matches for their clients. Deals often resulted where the selling agent did not know the seller or their agent and the selling agent’s only dealings were with the buyer. Suddenly, the concept that the selling brokerage owed its fiduciary duty to only the seller was no longer a neat and logical concept. However, it would take many years before the unworkable agency concepts would be sorted out and lead to buyer representation.

As the 1950s and 1960s progressed, a more formalized cooperative brokerage system, known as the Multiple Listing Service (MLS), was developed. Through the MLS, the concept of subagency evolved. Simply stated, this meant the listing broker was the agent of and represented only the seller. The listing brokerage would hire sales associates who were considered subagents of the seller. The listing MLS brokerage was required to make the listing available to all cooperating brokerage within their MLS. These cooperating brokerages were also deemed subagents of the listing brokerage, who were agents of the seller. If the cooperating brokerage had sales associates, they were subagents of the cooperating brokerage, who were subagents of the listing brokerage, who was the agent of the seller. During this period, an agency relationship with a buyer was not possible, since the agency relationship was always with the seller. The only duty a licensee owed to a buyer was to not lie when asked questions about a property. The concept of “buyer beware” was truly the reality of how the brokerage business operated and buyers were always unrepresented.

The rise of consumerism, as manifested in numerous court decisions, put pressure on the brokerage business to be more concerned with the interests of the buyer. Because of that, licensees working with buyers had an affirmative duty to disclose known matters affecting a property. For example, if the broker knew that a roof leaked, he would have to disclose this fact. This disclosure concept was later expanded by the courts to include conditions about the property that the brokers should or could have known.

By the 1980s, a government study found that nearly three-quarters of all buyers thought the brokerage they were working with was representing them as a client. The same study concluded that nearly three-quarters of all sellers also thought that the cooperating brokerage represented the buyer’s interests. It soon became obvious the concepts of agency law that the industry and governmental regulators had attempted to impose in order to simplify and clarify the agency relationships had not worked. Continued pressure from consumer groups and the courts finally led to the buyer representation movement of the 1990s.

In 1991, the National Association of REALTORS® formed an advisory group to study agency representation issues. Testimony was received from real estate practitioners, industry experts, the public, and state regulatory authorities. The advisory group’s report made the following recommendations:

  • The NAR’s multiple listing policy should be modified to make subagency offers optional. If subagency was not accepted by a cooperating brokerage, then the listing brokerage was to offer compensation to the brokerage representing the buyer.
  • The NAR would encourage state associations to promote changes in real estate law and regulations in order to promote disclosure of agency options. These options would include seller agency, buyer agency, and disclosed dual agency. The purpose of this recommendation was to assist consumers in making informed decisions regarding representation.
  • The NAR should encourage real estate brokerages to adopt written company policies addressing the handling of agency relationships with its clients and customers.
  • The NAR would encourage education of all members on the topic of agency representation. State regulatory agencies would also be encouraged to include agency as a mandatory topic in continuing education requirements for all licensees.

As of 1992, the National Association of REALTORS® adopted the following policy:

“The National Association of REALTORS® recognizes seller agency, buyer agency and disclosed dual agency with informed consent as appropriate forms of consumer representation in real estate transactions. The association respects the need for all REALTORS® to be able to make individual business decisions about their companies’ agency practices. Furthermore, NAR endorses freedom of choice and informed consent for consumers or real estate services when creating agency relationships with real estate licensee.”

These NAR changes to representation policy modified the way the industry practices. Exclusive Right to Represent buyer agreements now allow a buyer to contract with a brokerage to find, and negotiate, the purchase of real property. Generally, these agreements are for a specified period and require the buyer to pay a commission upon the closing of the real property transaction. As an agent of the buyer, the buyer’s brokerage owes all of the fiduciary duties (care, loyalty, disclosure, obedience, and accounting) to his principal, the buyer.

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