Monthly Archives: February 2007

Triggering My Hot Spot

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I have blogged about this before…it is really one of my “hot spots”.   This morning, not only did I receive an email from this company (oh, I mean SPAM) stating that this is information that I requested, which I did not, it is about something I am absolutely against: selling consumer’s information when they’ve had a credit report pulled to become preapproved.    [photopress:trigger.jpg,full,centered]

If you go to their website, they state, “Receive a daily feed of consumers in your target market that just yesterday had their credit checked for a mortgage loan approval.That ’s right, these consumers have just had their credit checked within 24 hrs, specifically for a mortgage loan approval! Now you can provide them with a pre-approval in just a few days for unlimited growth potential.”

Picture this, Mr. and Mrs. Homebuyer meet with a Loan Originator and sign many documents for the preapproval process including disclosure forms that their private information will not be sold. Within hours, they begin to receive relentless phone calls and post cards from other lenders.   It’s too bad the credit bureaus are not a party to this agreement and that it is legal for the bureaus to re-sale credit scores, addresses, phone numbers, debts, etc.

I’ll go eat a box of Valentine’s candies and go chill out in a corner somewhere.

 

 

another day of staging…

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Today was a busy day and another one that required a bit of handholding and education. We have been working with a client for several months now as they prepare a home for sale. The house has been a rental for several years and when I saw it in early December it was in not so great condition from a cosmetic standpoint. The former tenants had ruined the carpets in a scant 2 years of renting and there was plenty of cosmetic damage on things such as walls and doors where the teenaged daughters had vented their sibling rivalry.

You wouldn’t believe that this is the same house now.

I failed to take the photos I planned on today but I’ll post some of the “before” and “during” shots here and then I’ll follow those up later this week once we have the professional photographer’s work done. If anyone looks at this post, I’d really appreciate some feedback on whether you think me and the client did a good job. I’ve been offering a higher level of service to listing clients where we provide a lot of things such as professional cleanings, window washing (in & out), yard service, pro photos, and staging. I think it makes a big difference and I’d like to get your opinion too of whether going through this much work is worth it from the consumer’s point of view.

So, here are the beginning photos… stay tuned at the end of the week for the final shots…

front of the home – it needed some pruning, edging and trimming as well as a fresh layout of beauty bark.

Back yard photo – note the shrubs that have grown up high and are making the house look smaller than it is. The house needs plants that are more in keeping with the size and dimension of the home.

The kitchen and its cultured marble counter tops and older wall oven and gas stove top. Most people likely wouldn’t even notice but the stove top is too big for the space. Note how it goes past the fan above and is underneath the cabinet to the left. This is a fire hazard and was fixed when the house was updated for sale.

The living room carpet detail is hard to see here but let’s just say that it wasn’t the cleanest carpet I’ve ever seen. Lots of spots and stains. Underneath are what turned out to be really great oak floors as you can see a portion of them at the left corner of this photo. The floors were refinished prior to going on market this week. They look great and run throughout the length of the home in all bedrooms, hall, dining area and living room.

This is the 3rd bedroom just to give you an idea of how the room looked before since it is the smallest of the 3 regular bedrooms (not including the office that would likely qualify as a bedroom and has been used as such). We had the seller take out his home made bookcase, remove the dirty carpet, old trim and we had new doors installed.

Where's the line between "agent" and "lawyer"?

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As with any blog post, this does not constitute legal advice. If you have a specific question, consult a specific attorney. 

Recents posts (first by Russ, then by Reba) have examined the role to be played in real estate transactions by agents and lawyers.  No doubt, everyone has a strong opinion based on their own personal experiences.  But what’s the law on the issue?

We all know that the seminal case on the issue is Cultum v. Heritage House Realtors, 103 Wn.2d 623 (1985). In that case, the buyer told the agent that she wanted to be able to inspect the home and rescind the contract based on her subjective interpretation of that inspection. Acting on this request, the agent used a form “drafted by an attorney” to include in the contract a very simple inspection contingency: “This offer is contingent on a satisfactory Structural Inspection, to be completed by 8/20/80.” The agent used the “single standard form” provided by the broker. The buyer performed a whole house inspection and was not satisfied with the results. The seller, however, refused to return the earnest money because the report did not objectively indicate any structural defficiencies.

The trial court found that the agent, in drafting the contingency, engaged in the practice of law.  The Supreme Court agreed, as the agent clearly created a document that affected the legal rights and obligations of the buyer. However, the Court decided that, in the interests of an efficient real estate market, an agent should be allowed to engage in the limited practice of law.  Thus, the Court concluded (using “agent” in place of “broker/salesperson”:

“[An agent] is permitted to complete simple printed standardized real estate forms, which forms must be approved by a lawyer, it being understood that these forms shall not be used for other than simple real estate transactions which arise in the usual course of the [agent’s] business and that such forms will be used only in connection with real estate transactions actually handled by such [agent] as [an agent] and then without charge for the simple service of completing the form.” 

However, “if [the agent] believes there may be complicated legal issues involved, he or she should persuade the parties to seek legal advice.” Moreover, “when completing form earnest money agreements, [the agent] must comply with the standard of care of a practicing attorney.” 103 Wn.d20 at 630-31.

So when does the agent cross the line and engage in the unauthorized practice of law?  Before rereading the case in response to the above posts, I thought that a Form 34 was a standing invitation for an agent to cross the line. However, that very probably is not correct. After all, the agent in Cultum wrote a simple contingency, and that fell within the Court’s rule allowing agents to practice law to a limited extent.  (The agent was ultimately liable for the buyer’s loss because the contingency was poorly written, but that’s another topic).

The answer, as suggested by the posts and the comments, turns on the complexity of the clause being inserted into the Form 34. If it’s a “complicated legal issue,” it’s not appropriate for an agent.  Seller wants to take chandelier?  Probably OK. Contract is contingent on events not directly within the control of the parties? Probably not OK. Unfortunately, there’s no bright line rule to be applied in every situation.

In light of that rule, should agents be trained in how to insert contractual language in a Form 34?  After reading Cultum, I think so. They have the legal authority to do so and almost certainly will if necessary to meet the needs of the client. If they can and will do so, then they should have appropriate training so that they can do so competently.

And a final note: should an agent review a non-client’s PSA? Well, the agent does so at his or her own risk, as that review clearly falls outside of the rule set by Cultum.  The review almost certainly constitutes the unauthorized practice of law.

 

There's No Love for the Subprime Borrower

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It’s all over the news, we’re hearing about major subprime lenders having to restate their losses and every day, lenders are coming into my office to inform us of changes to their guidelines.   This is all good, right?    It will be tougher to provide loans for home buyers who maybe should be spending more time to learn about budgeting and using their credit cards.    What about the people who are all ready in these programs?

First, allow me to explain the basic dynamics of these loans.  Many of these mortgages are zero down, 80/20s (80% of the loan to value for the first mortgage/20% of the value for the second mortgage).   The first mortgage is typically offers a fixed rate for 2-3 years with a prepayment penalty (the standard is six months interest) that matches the fixed rate period.   In addition, the mortgages may be interest only or amortized at 30, 40 or 50 years.    The rates on these mortgages are completely dependent on credit score. 

When I meet with Mr. and Mrs. Subprime, I advise them of their options of buying now using this type of subprime mortgage or that they can work on their credit, job history, etc. and buy later with a better mortgage program.   Because there are no guarantee of what rates will be (or maybe because they know there’s not guaranteed they’ll clean up their act) and because they want to buy a house now, they often opt for the subprime mortgage.   Once this happens, I heavily stress (or Jillayne would say, I lecture 🙂 —which I’m sure I do) to Mr. and Mrs. Subprime that they have 2-3 years to change their spending habits because once their fixed period rate is over, their mortgage is going to adjust and do so big time.    I let them know that I want them to be in the best position for a refinance into permanent financing (or to have a better mortgage should they decide to sell the home assuming they have any equity) and that the subprime mortgage they are using to obtain their home is temporary financing.  

Many of my clients in these mortgages have done very well and I’m proud of them.   They have taken the responsibility of owning a home and having a mortgage to heart.  I’m able to restructure the original mortgage and improve their situation greatly.   The concern is for Mr. and Mrs. Subprime who just didn’t get the hang of it.   They continued to charge up their credit cards, they bought or leased a new car to go in their new driveway and maybe a new TV, too.   They’ve been sliding ever since the holidays and are now having a tough time paying their mortgages on time.   Maybe they just have one mortgage late.   Their credit is rough at best.   Their fixed period (and prepayment penalty) is over and now they really need to refinance fast because their mortgage has adjusted for the first time—their rate is now 2% higher.  Their situation has gone from bad to worse.    With all the tightening in the subprime market, even if their credit scores and scenarios are the same as when they bought, there may not be a program for them to refinance out of now.   They will be forced to sell (hopefully they have enough equity to pay commissions and other closing costs) or to somehow manage to choke down their increased payments.

I guess this post is a plea of sorts.  If you currently have a subprime loan (especially the type I described) please contact your Mortgage Planner to have your credit reviewed to make sure you’re on the right track to be able to refinance (or have a better loan for when you sell) when the time is due.   Do not assume there will be a program for you if you have not made significant changes to your spending and use of credit cards.   If you’re a real estate agent or loan originator, check in on your subprime clients to let them know of the changes in the industry…see if they need guidance to stay or get on track so they don’t wind up stuck with a higher mortgage payment, being forced to sell or foreclosure.

Web2.0 is About You

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Wonderful video from a Kansas professor…

(via ProBlogger)

I’ve been told I move a bit fast in my seminars (more than once!), but I found this guy to move at light-speed! Interestingly, if the video makes complete sense to you, then you will have no need for my presentation. However, if you’d be interested in learning a bit more about how consumers matter in this web2.0 world (i.e. “you matter”), and how you, as an agent, can flip this logic to use these web2.0 tools so that you matter (i.e. “brand you”), then I’d love to see you at my Seattle seminar on February 20th! (Or in Oakland, CA the next day!)

So far, the feedback from the seminars has been overwhelmingly positive. I was a little hesitant to make a big deal out of the seminar before I ran a few trials because my presentation is more-than-slightly unconventional and I started to doubt myself. It wasn’t until I heard from some of the attendees that it was one of the best real estate presentation they had ever been to that I started to feel more comfortable that I might be on to something big. 🙂 Also, both Jeff, Rudy and Brian give some encouraging feedback that will definitely keep me presenting at a few more seminars!

By the way, my presentation style was highly influenced by a short presentation given by Chris Smoak where he was able to move at the speed of light because the presentation moved with him. (Chris is the guy behind one of my favorite mash-ups ever, Bus Monster.) After witnessing Chris in action, I just knew I’d have to create a similar presentation some day.

Finally, Greg has been posting the audio from my presentation over on the Bloodhound blog (Part 1, Part 2). Personally, I think the seminar is simply too long for an audio presentation (it NEEDS the visuals!), but some may find it interesting, nonetheless.

Is Freakonomics Right for the Wrong Reasons?

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[photopress:fr.jpg,thumb,alignright]In my travels, many people quote the Freakonomics finding that agents get more for their homes when they sell, than the average house on market.  My brain said “duh, of course…what’s new about that.”

But then when the Freakonomics boys tried to ascertain why that is, they went into some sideways mode of properties for sale, time on market, etc…  Take the article I wrote yesterday as an example.  Do you think an agent would fall for the tactics of the builder, and buy his worst lot because it was “the only one” for sale today?  Hell no. 

If agents sell their houses for more money in the end, it is more likely because they bought better in the first place.

The most common error in a buyer’s thinking, is that they think their choice equals what is for sale.  Agents don’t do that.  Of course by agents, I’m not talking about every license carrying member of the mls.  Agents don’t buy “the T house”. Agents don’t buy the house that backs up to a busy road.  Agents don’t buy the house on the wrong side of the street without strong compensating positives, like view considerations.  Agents don’t buy the best “interior look”, while overlooking the exterior negatives.  Agents don’t buy the house where the pavement is higher than the front door.  Agents don’t buy “the bargain” with the most negatives, and brag that they got “a great deal”.  Agents don’t buy “a house” without looking across the street, and determining if there are future tear downs in this home’s view corridor.

Also, agents generally buy based on relative value, and not based on negotiating an asking price down.  Relative value is the only true pricing method.  “Negotiating a good price” is the biggest trap in real estate.  Agents don’t even go there, by and large, when they buy their homes.  Again, I’m not talking about every person with a real estate license, as some of those are simply consumers with a license these days.  I’m going back to a time when the only people with a license were those who actually sold real estate.  And if Freakonomics is tracking the sale of agent owned homes, then the purchase of those same homes would in fact be back when only agents and real estate licenses.

When someone goes in and out of hundreds of homes for a living, and sells homes for a living, they know the weaknesses of property better, and they never get dazzled in the new construction office by the cabinets and counter finishes.  They never look at that room of great “stuff”, until they first ascertain if there is a lot they are remotely interested in, and a floor plan that will hold up in value on resale.  The average buyer starts picking out cabinets and floorings like they are in Lowe’s or Home Depot shopping for interior finishes, and they don’t spend nearly enough time determining lot and floor plan first.  Everything’s nice when it’s new and shiney.  Agents think about resale before they buy, not when it is time to sell.

When I am looking at resale issues, when showing property to a buyer, they do often say “Ardell, I don’t even own it yet and you are looking at what will happen when I sell it!”  Yes, I do.  Because now is the time to look for the resale weaknesses…not when it’s too late and you can’t sell it for top dollar later.

Every house has weaknesses.  Many buyers don’t want to talk about weaknesses.  Agents know that a house with weaknesses that are easy to correct, equals bargain.  Agents know that weaknesses that can’t be corrected, should be avoided.  Someone’s buying everything eventually, but maybe agents make more money when they sell, because they never buy a house in the first place, without first determining all of the weaknesses, and making sure none of them are difficult to correct.

Whenever I go to list someone’s home who wants to sell it at the same price as the neighbor, and I point out they paid a lot less than the neighbors when they purchased, and likewise will need to discount accordingly now.  They always have the same line:  “But I got a real bargain when I bought it!”.  Yeah, right, that’s because you bought the T house and the T house is always a bargain.  It will be a bargain when you buy it and it will be a bargain when you sell it too.

There is never going to be a time when the average agent won’t get more for their house when they sell, than the average homeowner.  But that is not because they know a lot more about selling…it’s because they know a lot more about buying the right house in the first place.  Someone has to buy the houses with the uncontrollable negatives, and it rarely is going to be an agent.

Always, always,always ask this question before the agent writes an offer.  Would you buy this house if you were me right now, and if not, why not?  Would you let your son or daughter buy this house right now, and if not, why not?  Because an agent doesn’t have to tell you everything, but they are not allowed to lie.  Watch for hesitation.  Listen intently to what they are saying and what they are stuttering over.   And then ask this final question.  If I decided to buy a different house in 3 months, could you come back and sell it for at least what I paid?  If you don’t see them thinkng really, really hard when they answer that one, or if they start hemming and hawing…take that as a sign.  Every agent knows which houses they sell they will be happy to come back and sell for you, and which ones they are praying you stay in for a very, very long time.

So Stephen and Steven, you are correct.  But only because agents are better at buying the houses, that will later sell for more than the average sale price, of like property.

Confessions of a Zero-Down Lender

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This is a two part (well so far I’m planning a second post…their could be more) series of a couple of clients (names changed to protect identities, of course!) who have purchased homes utilizing 100% financing.   Both parties utilized similar programs but they wound up in entirely different situations.  

Mr. and Mrs. Spender eagerly wanted to purchase a home.  They were tired of renting and had two kids with one on the way.   They didn’t have a lot of money in savings and their credit had a troubled past (some of it was medical and some was plain irresponsible).    They live paycheck to paycheck but they are anticipating receiving raises and bonuses from their employer.   Their credit report shows that they rely on their credit cards and you can see on their bank statements that they dine out a lot and spend their money on frivolous extras.  

Based on their credit scores, I was able to provide them with an 80/20 from a sub-prime lender who does not verify where their funds are coming from for closing and would allow for the seller to pay up to 6% of the closing costs.   I structured their preapproval with the seller paying all the closing costs.  In fact, at funding Mr. and Mrs. Spender receive a check back for a majority of their earnest money.

Not long after closing, the Spenders discover that the gas heater in their home was defective (apparently this was missed on the home inspection?).   It just so happened that the repair company they called to repair it had previously serviced it and informed the previous owners that it needed to be replaced.  Mr. and Mrs. Spender decided to take their Seller to Small Claims Court and their Agent attended with them.  I had asked them what the results were, here is their edited response:

“Yes we took them to court and even though we had all the documents showing that the (sellers) knew the furnace needed to be replaced and needed to be fixed the judge did not find that we had proved our case… so we got nothing.. (the Real Estate Agent) came with us and she was just as shocked…  She too was amazed that all the paperwork we sign to protect us from buying a home with flaws, the (Sellers) even stated and had to initial that there was no problems with the heating system and even though we had documentation to show that they knew there were problems and didn’t disclose it… we got screwed to be honest…. They knew.. They didn’t care… and the judge just wanted to get out of there… It was a joke…

Buyer Beware – New Construction Sites

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[photopress:images_1_2_3_4_5.jpg,full,alignright] I wrote an article earlier today about a scammer. I can almost appreciate the creative talents of an obvious scammer like that. But when it comes to the real estate industry, I just want to puke.

I stopped into a new construction site yesterday to evaluate it for one of my clients. There are four people in the room. A guy sitting at the site plan talking to a young asian couple and a woman standing a bit on the side. I see the guy giving the “hard sell” about two and only two “available” lots. I’m standing back and looking at the site plan and I see about 50 available lots. Only two of them have “available” stickers and 6-9 have a sold sticker. So doesn’t that mean all the ones with NO sticker are “available”?

For some reason the young couple doesn’t “get” this, but I just keep my mouth shut and wait and watch. Can’t quite figure out who the woman in the room is yet. The guy tells the young couple something about how Tuesday or Wednesday is the deadline for them to get one of those two available lots. They thank him kindly and leave to think about which one they want, if they want one at all.

When they are out of earshot, I ascertain that the woman is an employee of the builder before I step up and say, “I’m here to help one of my client’s pick a lot. Where are those big electrical towers I saw when I drove up, but don’t see on the map here?” At this point point the woman gets obviously “annoyed”. I continue to ask questions about all of the good lots. The woman keeps trying to push me at the two “available” lots. I ignore her and continue to evaluate the better lots in the development.

As I’m leaving I ask about the other developments nearby. The guy knows nothing. The woman gives me the whole run down of the builders other projects.

Then they tell me that HE is the agent for the SELLER and SHE is the on-site agent for the BUYER. What a JOKE! She is obviously the closer of the two. She obviously works for the builder and knows more about the builder’s stuff than the guy posing as the “seller’s agent”. What a “Good Guy; Bad Guy” scam that is! Nauseating, isn’t it?

I have one final question. What is the commission to a Buyer’s Agent who isn’t “the builder’s hired closer/buyer’s agent”. He says “FULL COMMISSION”. I say, “What is FULL”. She says 3%. I say, what does the buyer get if they have no “Buyer’s Agent”. She says, they get ME. LOL What a hoot. I said so the buyer gets nothing if they have no agent? No price reduction? No upgrades? No something for the builder not having to pay an extra $21,000?? Nope. Nada. Not an option. I ask if the buyer had lost the opportunity to have an agent if they had “signed in” already. They said no. Great News!

So I leave, I go to my client to evaluate the property they will be selling. I tell them there’s an extra $21,000 on the table for us to include and negotiate, if they buy that new construction (which they had asked me about), or even if they buy a different property. My fee will be less if they buy the new construction, of course, because they were the ones who asked me to go there in the first place to check it out. Well, no. They just said they were thinking of buying in there before I even met them, and didn’t ask me to check it out.

So by poking my head into the New Construction site, even though they hadn’t asked me to, I found an extra $21,000 that would have been left on the table. Turned out they will not likely buy there, at least not before considering other options. My gut says if the builder is willing to pay 3% to an agent, even though the agent wasn’t with them when the buyer first went in to the new home sales office, there’s probably something wrong with the place.

Every not lot sold in a new construction site is available. Maybe not today. Maybe they WANT to sell two at a time because it squeezes the buyer more into making a quick decision. But if it Ain’t SOLD…I’ts AVAILABLE, regardless of the little stickers. No sticker equals available.

Speaking of Attorneys – What's Up With This?

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Is this a con-artist spammer?  Sure looks like it.  My ancestors are more likely to be vinyard owners than oil magnates.  Actually, when I went to Italy, the DellaLoggia stores were fine jewelry stores.  The kind where you have to be “buzzed” in with locked doors.  And what are the odds that a “DellaLoggia” is going to have the first name of “Randolph”.  Sounds like a fill in the blanks spam mail.  They could at least have used Cosmo or Guido or Guiseppe.

We all get tons of emails like this every day.  But this one makes you stop a sec.  Creative to say the least.  Possibly illegal, as in “impersonating an attorney”.   “Solemn Confidentiality” is a clue that he’s doing something wrong…don’t ya think?  If I’m an heir…why is that a big secret?  I spent too many years in the Trust and Estate business to buy that one.  I think it means don’t let anyone know I’m an illegal scammer please.

What would you do with it?  Where do you think it is going if I emailed him back and let him fax stuff to me as he requested?

Thomas Lucas & Co

26-27 Cannon Street,

London EC4M 5SE,UK

Phone:+44 79 5191 5337

Dear Ardell DellaLoggia,

This is a personal email directed to you and I request that it be treated as such.

I am Thomas lucas, an attorney at law.

I am the personal attorney/sole executor to the late Mr Randolf D. DellaLoggia, hereinafter referred to as ‘my client’ who worked as an independent oil magnate in my country and who died in a car crash with his immediate family on the 4th of oct, 1998.Since the death of my client in oct, 1998, I have tried to locate any of his extended relatives whom shall be claimants/beneficiaries of his abandoned personal estate and all such efforts have been to no avail. Moreso, I have received official letters in the last few weeks suggesting a likely proceeding for confiscation of his abandoned personal assets in line with existing laws by the bank in which my client deposited the sum of 3.8 million U.S.D.

On this note I decided to search for a credible person and finding that you bear a similar last name, I was urged to contact you, that I may, with your consent, present you to the “trustee” bank as my late client’s surviving family member so as to enable you put up a claim to the bank in that capacity as a next of kin of my client.

I find this possible for the fuller reasons that you bear a identical last name with my client making it a lot easier for you to put up a claim in that capacity. I propose that 35% of the net sum will accrue to me at the conclusion of this deal in so far as I do not incur further expenses.

(Oh, no!!  He used the “D” word.  Since when does an attorney have a “deal”?)

Therefore, to facilitate the immediate reprofiling of this fund, you need, first to contact me via this email signifying your interest and as soon as I obtain your confidence, I will immediately appraise you with the complete details as well as fax you the documents, with which you are to proceed and i shall direct on how to put up an application to the bank.

HOWEVER, you will have to accent to an express agreement which I will forward to you in order to bind us in this transaction.

Upon the reciept of your reply,I will send you by fax or E-mail the next step to take.I will not fail to bring to your notice that this proposal is hitch-free and that you should not entertain any fears as the required arrangements have been made for the completion of this transfer.

Like I said, I require only a solemn confidentiality on this.

Best regards,

Thomas lucas,

Partner Corporate & Fiduciary Group.

 

As a Trust and Estate Officer, I did once have a monstrous file on a huge line of potential heirs of mineral rights that went on for many, many years.  Got to the point where everyone was going to get $1.76.  What a pain in the neck account that was.  So it’s possible.  Likely?

In case you see this “Attorney Lucas”, you will find the heirs in this Country had the name changed inadvertently to DeLoggio and I corrected it back to my Grandfather’s name in Court.  So look for all of the DeLoggio’s, though I could give you a list. 

Then go see if Robert Loggia took the Della off the front, when he went into acting 🙂