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Date: Sep. 18, 2009
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I just completed my first presentation of one of my new classes: “Financing, Dollars and Sense©”. When you are a trainer, you pay a lot of attention to the faces of the people in your audience. I’m constantly scanning their faces for: confusion, boredom, disbelief, and best of all, the “Aha!” expression. In the first run I had virtually no boredom that I could see (a good day!) lots of “Aha!” and some combinations of confusion and disbelief. In this course, the disbelief became a clear “I never knew that, Yipes!”.
The response pleased me, because it means, to me, that I’m on the right track with this course. My contention for quite a long time has been that real estate agents have shifted the entire financing part of the transaction to the lenders. The reasoning used is: “Well, the buyers have to have a pre-approval letter, anyway.” Or “The lender can do this better/quicker than I can”, etc. The problem is that we are now reaping the bitter fruits of that harvest. A recent Wall Street Journal article stated that approximately 1/3 of the sales in July, nationwide, were short sales or foreclosures. We all know now how we got into this mess—too many loans made to too many unqualified buyers; unscrupulous lenders, who, knowing that the loan would be sold, did not hesitate to make a loan that had slim to no chance of being repaid; stupid buyers who didn’t understand what they were getting into; greedy buyers who thought that the inflation in real estate prices would last forever—I could go on and on, but I won’t.
Let’s get back to my point—which is financing is part of the transaction that the agent should be closely involved with from start to finish. This matters even more if you have chosen to represent the buyer as a client. I use the word client in the sense used by the NAR Code of Ethics, and as is generally understood in the context of agency: a client is a consumer you are now representing. Once you make a consumer a client, (as opposed to a customer), you pick up, in virtually all states, fiduciary duties to that person. Those fiduciary duties include, usually, advocating on behalf of your client, protecting them from foreseeable risk and harm, etc.
When I started in real estate, in the mid to late 1970’s, we always financially qualified buyers before showing them homes. Period, end of sentence and end of discussion. My first brokerage was the family owned business; and my Mom told me: “Don’t waste your time if they can’t afford to buy; and don’t show them things they can’t afford, because then what they can afford will disappoint them.” Good advice then; good advice now. Did it work? Absolutely! Last year, I had an encounter with a former client I had sold a house to 30 years ago. She said to me: “I never forgot what you told us when we bought our first house. You told us to look at the payments, and our budget, and to make sure that the mortgage payments would not strap us so much that we wouldn’t have money to go out for pizza, go play golf, and go on vacation. We took your advice, and I’m so glad you did.” I live for that kind of remark!
In that time period, Fannie Mae stuck to its original ratios of debt to income—the lower end ratio of 28% for PITI (Principal, Interest, Taxes and Insurance) and the higher end ratio of 36% for all debt. Nowadays, FHA has more liberal ratios (33% & 43%) and many conventional lenders will stretch the upper end ratio, for borrowers with ‘excellent credit’ to 50%. But when I walked my students through the math, they were stunned (some of them). Some of them were nodding and were already there. One student related being fired by a new home builder for telling buyers they could not afford that particular home. Another employee of the builder sold it to them, and they went into foreclosure within a year. Is that the American Dream, or is that a nightmare?
You see, when you walk through the math, here’s what you understand: first of all the ratios are based on gross income, not net income; and you can only live on your net. Even when you tinker with the numbers by having the borrowers adjust their withholding,(in most places, buying a house is roughly equal to two standard deductions, or two kids) in order to increase their net pay, the stretched mortgages and the higher ratios do not leave a lot of money for all the other things consumers have to have, or want to have: food, clothing, car insurance, life insurance, car maintenance, house maintenance, utilities, personal items (gym, hair, nails), vacation, entertainment, medical expenses, tuition for soccer camp, pets, gifts, and maybe even savings!
My students had some real eye opening moments when we ran through the difference both term and interest rate make to amortization. Many of them had never done the math for a bi-weekly payment. We looked at a real amortization schedule and talked about how our clients could pre-pay a mortgage by simply adding next month’s principal. At the end of the class, most of them said they had learned a lot and intended to be more of the process with their buyers. That’s my goal: to have agents understand the process, understand the numbers, and be able to show their buyers exactly what the numbers are. Many buyers who are taken through the numbers will say: “The lender is willing to loan us $XXX,XXX, but, you know, we really aren’t comfortable with a payment that high.” If more of that had happened in the mid 90’s to the mid 2000’s, we might not be where we are today!
I’ll be offering a version of this course at the Ohio Association of REALTORS® Convention, the 20-21 st of this month in Columbus, Ohio, and I’ll be also offering this course all over Pennsylvania. To contact me, email me at: Melanie@TheMelanieGroup.com
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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I just finished my month as the "Ask the Expert" for REBAC. Since I am also an appraiser, valuation questions were my assigned topic. First of all, I have to say it was so much fun I'd do it again -in a heartbeat! Second of all, I was very impressed by both the thoughtful questions I received and the obvious genuine desire on the part of agents to understand pricing and valuation, and do it right.
There were some themes that several questions returned to, so I'm going to recap here (not word for word), one of the major issues, in an effort to help both sides of this aisle-the agents and the appraisers.
Without a doubt, one of the number one myths some agents have is that appraisers don't 'count' finished area below grade. We most certainly do! The big issue is an understanding of Fannie Mae guidelines. When I teach anything to do with financing or appraising to agents, I always refer to Fannie Mae as the 'eight hundred pound gorilla'. That's because it is-in the sense that most residential mortgages are going to be done to Fannie Mae guidelines. The application will be taken on a Fannie Mae form; the borrower will meet Fannie Mae Guidelines; the appraiser will be asked to complete a Fannie Mae Appraisal Form (including, these days, the troublesome 1004MC) and the appraisal must be done to Fannie Mae Guidelines. Fannie Mae has always had the same position on square footage: the appraiser is to measure the exterior of the house above grade to calculate the living area. All of this area must be totally above grade. So, if the house is a split, or a bi-level, or another local term you use for a home where part of the living area is below grade-it doesn't count-in the above grade living area. It does count as "finished area below grade". This usually gets the 'but what if' questions, as in: "What if the house is walk out at the rear?" Answer: "What is the front like? In the typical walk out at rear house, the opposite side is either completely or partially below grade, depending upon the grade of the lot. This particular issue causes a lot of ill will between appraisers and agents. Here's the agent side, possibly learned at the feet of the broker: "We are selling finished square footage, so count it all and put it in the MLS. Don't measure the house, that is too risky!" My answer: "Hello????? You are competent enough to take and pass a real estate test and you don't think you can measure the outside of a house? Get a grip!" Furthermore-by 'counting' all the square footage and putting it into the MLS that way, you create false information for an appraiser. Furthermore, if you took that 30 x 40 house with a finished basement, and called it a 2400 square foot house, not a 1200 square foot house, and compounded your error by developing a CMA by comparing this 1200 square foot house (with a finished basement) to houses that really have 2400 square feet (above grade), you will get the wrong answer. That's math, folks. If you start with a flawed assumption, you get a wrong answer. Here's the appraiser side (hold on to your hats, I'm paraphrasing many, many appraisers (I teach them as well) and they aren't tactful): "These @#$%^*+ agents don't know a $#@% thing! They can't measure a house to save their lives, and everything they have in the MLS is wrong! How can we do our job if they keep putting the wrong data into MLS?"
Sigh! We have some issues here folks. And, we need each other. I personally am both of you-I'm an active agent, and an active appraiser-and an instructor, to boot, so I get to hear your unvarnished opinions of each other. Here's the deal, folks. Agents, you need appraisers. Without loan approval, we don't have closings; without closings, we don't get paid. Getting approvals, followed by closings and commissions, is a good thing. Appraisers need you for information that you may not put in the MLS. I constantly tell appraisers you are often the first group to feel the tremors of a changing market-you are 'on the ground'. Appraisers, you need agents. As I just pointed out, they can be wonderful sources of information that may not be in the MLS. I have discovered a changing market through discussions with agents, as well as the 'real reason' a house didn't sell-which can be anything from a strong cat smell to an uncooperative seller. Without agents selling houses, we are stuck with non-brokered sales, and those things are nightmares to use as comps because of the problems verifying the data. So, here's my proposal: agents-can you start trying to measure houses-and get it right? Report below grade area as below grade-the appraisers promise they will 'count it'. Appraisers, educate the agents in your area about how you come up with adjustments and why. Use the 'better information' I hope you will soon get to do your work, so that loans will close, agents will have commissions, you will have fees, and comps. After all folks, at the end of the day-we are all REALTORS®--or at least I hope you are.
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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Date: Apr. 14, 2009
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I'm in York PA, today, teaching Technology to appraisers (or new tricks to old dogs, as one of the student said). This is a demo of blogging for them.
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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As the line from the song “The Gambler” says, you have to ‘know when to hold ‘em, know when to fold ‘em, and know when to walk away”. That is truer than ever about real estate and listings. I am primarily a real estate educator, but I also continue to list and sell, working as a team with my husband, so I can keep my hand in the market and know what is going on. I talk to agents everywhere I teach; in March alone, I taught in Texas, Pennsylvania, Tennessee, South Carolina and Florida. Everywhere, I’m pretty much hearing the same thing: agents are working harder than ever before; buyers are pickier and looking at more houses; financing is an ever-moving target, and getting harder all the time. On the other side of the equation, we have sellers….and we have sellers. My husband and I have encounters with three different sellers since the beginning of the year that we applied the words of the song to—and we walked away. In this market, with the time we are investing in our clients, our deals and the problems, there simply isn’t time to invest in the unrealistic seller.
Seller #1 owns a lot in our beautiful Pine Creek Valley, here in North Central Pennsylvania. It has awesome creek frontage, and gorgeous views. It is also flood way, which (by the way) is way worse than flood plain. Flood plain you can build on; flood way you cannot build on—under any circumstances, due to federal regulations. Seller #1’s opening comments to me in our first conversation were: “This isn’t a property that Joe-Six-Pack is going to buy. It will take a special person. And, I’m not local, but you are and you know how to get around those regulations so someone could build there.” Well, I am local, but I don’t have any formulas for getting around a federal regulation. Seller #1 had his lot listed last summer with another company—which had not indicated on the MLS sheet the status as flood way—they had simply said: “Check with zoning officer”. At the beginning of the year, we had made a pledge to ourselves that we would not take seriously overpriced listings. Seller #1 thinks his lot is worth about $130,000 more than we think it is worth. We told him that. He said he had had an offer within $20,000 of his asking price, but had rejected it. We said to him: “You should have taken that!” We said to each other: “Two fools met—one for offering that much and another one for rejecting it!”
Seller #2 came to my husband via a referral. The person making the referral is a close personal friend of the seller, and apparently agreed with her estimate of her market value, based on “it’s what I have in it.” Well, in Appraisal 101, I teach students that cost does not equal value. In addition to her highly inflated opinion of her value (she wanted $200,000 more than any recent sales in her neighborhood, and her house is not larger or nicer, and neither is her lot), she had lots of friends ‘advising’ her on how to sell her property. Despite her agreement that most buyers would not be local (again, she is in our second home market), she demanded weekly insertions of picture ads in both local papers. Newspaper advertising, as we all know, doesn’t do anything except keep some sellers happy—which is a poor reason for any agent to do it. Jim had stressed to her the numerous websites we market our properties on and our results from our marketing program. From there, she had opinions about everything from sign placement to what the MLS sheet should say. And, some of her suggestions were not just bizarre, but misleading. We don’t mislead when we advertise and market properties. On top of all that, she was beyond high maintenance—after one short week, it was obvious she thought she was the only client Jim had and deserved at least two phone calls daily. I’m all for keeping in touch with clients, but I’m not a babysitter. Jim had felt compelled to take this listing; he turned it over to the broker and said: “I don’t know if you can make her happy, but I know I can’t.” The broker decided he couldn’t either—so she’s out there—with her price, her ideas, and her needs—and the other agents in our market are welcome to her.
Seller #3 had had an appraisal on a property he inherited which has outstanding curb appeal. We agreed last fall to try it at ‘his price’ which was about 30% over appraised value. We had a lot of initial activity, then nothing. We had a wonderful virtual tour slide show with over 30 photos on it. Interested parties told us they would not make offers, because they didn’t want to insult the seller. I ran Google analytics on our websites and showed him the hits, telling him: “7000 hits and no appointments is a reaction to price”. The house although lovely, is simply overpriced. He took it off for the winter. Spring came and I updated him—in the price range his home is in, we have an eighteen month supply. I suggested he get realistic about the price; he had tried it higher, but it hadn’t worked. He now says he is ‘going to try another agent’ because it just ‘wasn’t in the newspaper enough’. Go, with my blessing. I don’t have the time and energy to deal with sellers who won’t be realistic. Ads in the newspaper aren’t going to sell houses, not in 2009. Aspirational prices are not going to bring offers in a market glutted with so much inventory. A few months ago, I read a survey where property owners were asked two questions: “Have real estate prices declined in your neighborhood/market?” and “Has your house declined in value?” Amazingly, a high percentage said: “Yes” to the first question but “No” to the second one. Folks, this is like attending your 30th high school reunion and deciding that all those other people have aged, but not you! Tough times call for tough agents. I listed a property yesterday—at a good price. I’m pretty confident I can sell it for the owners. I plan aggressive Internet marketing, and other things which work for this type of property—but not much newspaper advertising—because it isn’t working. I have a listing appointment this afternoon. This seller was previously listed with an ‘Aspirational price’ with another broker. If she won’t be realistic, I’m walking away. After all, you have to know when to walk away.
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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I’m in the San Antonio airport now, heading to Harrisburg, where I’ll do York, Harrisburg and York and then head home. At the end of the month, I head south to South Carolina, then on to Naples Florida for the RSPS Symposium. Here’s the great thing about my job: I get to meet awesome REALTORS® all over the country, travel and see new places and new people. Here’s the awful thing about my job: flying (no longer fun at all) and some hotels and restaurants along the way.
The other great thing is that when you train, you learn. My students are always giving me information, and things to think about and add to what I’m doing. In Nashville, I did the new Green Core Course from NAR, and then the one day Green Residential Elective. Nashville has great REALTORS® and wonderful staff—a special thanks to Judy Ransom at GNAR and her assistant Donna for all they did to make me so comfortable. Nashville also has some really cool green things going on in real estate, and REALTORS® who are eager to learn and adapt.
In San Antonio, I got to be at the ERA Annual Convention, teaching eBuyer. I love eBuyer; in part because my friend Amy Chorew and I re-wrote it for REBAC, so I think (immodestly, I guess) that it is a great course. My husband doesn’t always get to come with me, but he did come to San Antonio, because neither of us had ever been here and wanted to see the great city with the Riverwalk and the Alamo. It didn’t disappoint at all; we ate dinner our last night in town at the Chart House Restaurant, on top of the tower (it’s a rotating restaurant, very cool). We did the riverboat ride and it was a good trip. Students and ERA were awesome. Only negatives: Sigh! Why do hotels like the Hyatt, which charge an arm and a leg for the room, then add on an Internet access charge? Tacky, tacky, tacky! Plus, the hotel restaurant had terribly slow service and very high prices. We went once and didn’t go back.
The San Antonio airport is awesome; I’m seated on a little stool, in front of a counter, where I could plug in my computer and get free Internet. YESSSSSS! So, I can write a blog while waiting for my flight to take off. Sweet!
I’m doing appraisal classes back in PA—the appraiser in my state all have to renew their licenses by the end of June, 2009. One of the hot topics with appraisers is the new FNMA 1004MC form, which is a market conditions form. I’ve reviewed it; I’ll be teaching it; and I think it is more problematic than it may appear. I understand why FNMA wants better information; but I don’t think anyone is lining up to pay the appraiser more money for what will be significantly more work in some markets.
The end of the month, I’m off the South Carolina, again to teach appraisers. From there, I head to Naples Florida for the RSPS (Resorts and Second Property Specialists) Symposium. I’m teaching the core RSPS course, as well as offering opinions on trends in second home buying. This market has really been hit hard—on a number of fronts. First of all, second homes are totally a discretionary purchase—no one needs a second home. Second, buyers often pull their money out of the stock market to buy a second home. That’s not working real well either. Third, lenders are very tight, and nothing I’ve been able to find in any TARP money or economic stimulus plan has anything positive for this market. These are often the affluent; they will agree that they want to ‘pay their share’ but the buzz I’m hearing from other RSPS REALTORS® is that many of them feel that they are being asked to pay more than their fair share.
When (notice I said when, not if) the real estate market turns around, some of this will iron itself out. For now, I’m seeing fear and indecision on the part of many buyers. The smart REALTORS® are continuing to press on, gaining new knowledge, because they know we are also building some serious pent-up demand. Those in place who are ready when that happens will do, in my humble opinion, quite well.
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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Ever wish there were ‘three strikes and you’re out’ in real estate? I have. This week, I heard, saw or observed three different strikes, with three different agents, and they all made me say: “Get Serious—or Get Out of the Way!”
Agent #1 is a selling agent. She had buyers who wanted to go back through a house for the third time before making a decision. The listing agent knew this, and anxiously called for a report. The reply: “I waited five minutes—they were late—they’ve seen that house; if they want to buy it, they will.” Anyone out there want a buyer badly enough to wait for more than five minutes? I thought so!
Agent #2 is a listing agent. His MLS sheet states: “Deed restrictions; on file in office.” Selling agent asked for them last week, then again early this week, then again mid-week. Selling agent explained to listing agent that his buyers are very interested but want to review these documents before signing a contract. The property has been on the market 180+ days. I’ll bet the sellers want to sell it. The last word the selling agent heard, from a secretary in the listing office was: “Oh, I have to stop by the courthouse and pick those up for him. We don’t have them yet.” So….the documents that were on file in office were apparently on file—in the recorder’s office. Sloppy real estate! Anyone out there want a saleable listing badly enough to do your homework and know what you are selling? I thought so!
Agent #3 is a listing agent. First of all, the selling agent called her and said the buyers are ready to go on a $300,000+ sale that has been pending since early December. She didn’t think they could close that quickly; she thought the seller needed ‘more time’ to get her stuff out (the seller moved last fall and took most of her stuff). Then, the listing agent asked about fuel oil proration. The selling agent said: “Read the contract, which my client’s attorney prepared and you reviewed with your client. It does not call for fuel oil proration.” The listing agent’s reply: “Oh, that’s my fault, I must not have gone over that with my seller. She’s going to be really mad.” Anyone out there who thinks that part of your job—a big part of your job, in fact, is reviewing contracts with your clients before they sign them? I thought so!
In all three situations, if and when a contract goes to closing, half the agents received compensation will have not really earned their keep. They will have done less than they should have, and in some cases, the sale will never happen, due to incompetence, laziness, or a combination of the two.
Here’s my point, folks: it’s an ugly market out there, but those of us determined to sell real estate have an uphill battle, not with sellers and buyers, or lenders and title companies—but with our colleagues. If you are in real estate, do your job, do it well, and treat every buyer or seller like they are the most important client you have. Because they are. And if you are not willing to do your job, get out of the business and let those of us who are willing to do the job have the business. Work hard, work competently, do your job—and you will prosper.
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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It's the New Year (actually January is coming to a close) and we see the usual changes in real estate this time of year. Across the country, if dues are assessed on an annual basis, many agents are hanging it up. It was fun while it lasted (2000 through 2005), but lately, it's been too much like work. My take: I'm the airline attendant to these folks: "Bye-Bye". I've always said our business is no place for sissies. Yes, we had some easy times in the early part of the century, but it's more like real estate as I've known it for 30 plus years now-it's a great business, but the only place success comes before work is in the dictionary.
Along with the agents leaving the industry, we have musical chairs within the industry. This one is opening his own office; this one has left to manage a branch office, that one is changing brokers (again!). Some of this movement is healthy. Some of it is overdue. I just observed an agent make a move that will, in my opinion, better her career-wise and reputation-wise, and all I could think was: "What took you so long?" The former broker this agent worked for did not enjoy a great reputation with everyone, and she had gone as far as she could go in that company.
Another agent I know struck out on his own. I admire that, even though my experience tells me a good agent can make more money when he doesn't have to be bogged down by the day to day obligations of running a company. On the other hand, this agent was at a family-owned business, and he wasn't family. They don't say blood is thicker than water just because it's a catchy expression.
Then, there's an agent I know who has now moved to the seventh office in ten years. No matter what, no matter where, it doesn't work out for her. Personality conflicts; the broker is unfair; the advertising policies aren't right; the other agents steal her customers, etc. etc. etc. Her belief that a new office will solve all her problems is as silly as the seventh broker hiring her….or the fourth, fifth or sixth. Maybe even the third. She's the Liz Taylor of real estate offices, and she's being enabled by brokers who don't stop to ask themselves: "What do I do here at my company that is that different from the last nine companies, and will keep her happy?" Anyone can see that a new agent can make a mistake, and pick the wrong company. But to pick the wrong company six times?
The merry-go-round just keeps spinning, though. By spring, we will have more
agents who have left the business, plus a fresh crop of newly licensed agents
certain that being in the million dollar club means you are a millionaire. The agents
that you don't always notice in this business are the consistent ones. They are the
ones who list and sell, and list and sell, and keep plugging away at it. They try new
things. Sometimes their brokers really annoy them, and most of the time, they roll
with it. They are the backbone of many real estate offices because they aren't
divas and they aren't flashes in the pan. If you are new to our business, here's my
advice: find one of these agents-and emulate them! And if you are a broker,
appreciate them. They don't throw tantrums, like the divas; they don't suck you dry
and then leave you for your competition, like some; and they don't take an
inordinate amount of time learning the business, only to decide it is way too much
like work and they are going back to a 'real job'. Cherish those agents-they are
your treasure!
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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Happy families are all alike; every unhappy family is unhappy in its own way.
Leo Tolstoy, Anna Karenina, Chapter 1, first line
Russian mystic & novelist (1828 - 1910)
To paraphrase, all happy real estate markets are alike; each unhappy real estate market is unhappy in its own way. That may be a stretch, but I've been to the two biggest conventions for REALTORS® that there are in the US during the past two months-NAR in Orlando, FLA, and Triple Play in Atlantic City New Jersey. I was privileged to be a speaker at both conventions; I taught ABR as a pre-convention event at NAR and two of my own courses at Triple Play. At both conventions, attendance was down…way down. And the 'talk in the halls' was worried. On a shuttle bus in Atlantic City, I heard one 'seasoned' REALTOR® say to another: "I've been through bad markets before. I lived through the late '70's, early 80's, when interest rates were so high. This is different." This is different, indeed. To begin with, never have so many duped so many out of so much money. From Madoff (the media's latest bad actor) back to the many perpetrators of the sub-prime debacle, lots of otherwise rational, fairly intelligent people have been cheated.
And now, in an unprecedented way, the government is throwing money at the problem. Big money-and they are throwing it everywhere. Today's Wall Street Journal (12/22/2008) reports that commercial real estate developers are now asking to be part of the bailout. It's like a wonderland out there, and not the 'winter wonderland' they are warbling about on the radio. Call me a simple person, but here's what I don't get: Doesn't anyone see that all this bailout is just going on our tab? We the taxpayers are paying to bail out, let me see: insurance, bankers, automobile manufacturers, and now, maybe a part of the real estate industry. And in the first round, there was no accountability. Zero, zilch, nada. I really don't get that. Whenever I've wanted to borrow money, I had to answer pointed questions, like: "What are you going to do with it?" "How do you plan on repaying it?" "Can you afford this loan?" Instead, we are just, I don't know, heating up the presses over at Treasury and making money to fling around. Well, what's the point of throwing money if we aren't fixing the underlying problems? Yes, I know, Congress is 'reforming' the mortgage industry. And the banking industry. And Wall Street. But real reform, in my opinion, won't happen unless or until there is a return to accountability. If every lender made every loan as if they would never be able to sell it; if every appraiser did every appraisal as if they'd have to buy the property back for the number they appraised it for; if every fund manager made investments as if he'd have to cover any shortfalls out of his own pocket, we'd have accountability. And if Congress would have to get the voters' approval to go into deficit spending-each and every time-- we'd have accountability. Folks, we don't have accountability-we have nothing close to it. One of the things I think we will have shortly is inflation. You can't throw this much money around an economy without getting inflation. What does inflation do to real estate? Do you remember the seventies? It goes nuts!
And this market is different. It's different because people are scared. They are afraid they'll lose their jobs, their houses, their cars, their pensions. They are scared because they have seen this happen to other people-or it has already happened to them. And when the read the Internet news, or watch cable, or pick up a newspaper, there is more doom and gloom there than they can handle. People are scared who shouldn't be scared. Here's an example: I had an interaction with my computer tech guy last week. He fixes computers. He's really busy. People are fixing instead of upgrading (Moi, for example!). His significant other is a nurse anesthetist. She's got job security, because if you need surgery, I'm pretty sure you (and the surgeon) are going to make certain you are out for it, not wide awake and fretting. People don't stop getting sick because of the economy. For people like him, this market is awesome. There's great inventory (in most places) and low interest rates, not to mention, in some market, outstanding buys. Here's what else I did this fall, before the two conventions: I did state conventions, and other courses. And everywhere I went, from New Hampshire to Colorado, I asked the agents the same question: "Do you have outstanding buys in your market?" And everywhere I asked the question, I got the same, resounding, answer: "Yes!" I truly believe that in five years, our clients will be saying to us: "Why didn't you make me buy more real estate?" Now, for naysayers, here's what you are thinking: "Well, the market hasn't bottomed out yet in my area." Or "The national media says real estate won't recover until 2010" or "It's still too early". To which I say: "He who hesitates is lost" and I add the famous Warren Buffet quote: "The time to be fearful is when others are greedy; the time to be greedy is when others are fearful." Don't miss out on this opportunity-it won't last forever.
Here's my final consideration, and it is directed at you and me-the real estate professionals in the room. Sub prime money has gotten tight, and non-existent in some places. Do you remember selling houses to people during 2000-2005, and you were amazed that they were able to get a loan? Guess what? They lost that house, and they are tenants again. Tenants are those wonderful people who buy a property for the investor. Remember, real estate is the only investment someone else will buy for you. If you are in our industry, and you possibly can do so, I urge you to buy real estate yourself. Do your homework, check it out, but invest. My view is that real estate will lead us out of this recession, and in a big way. We are looking at a long view, but we will, I think, have inflation coupled with fundamental appreciation that will begin as the markets level out. We will also then have pent-up demand, which is a wonderful thing. I truly believe the people who invest in real estate in the next two years will be very glad they did in the next ten years.
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Ready….or Not
The holidays are a time of preparation, and this year is no different. And, most of us see the end of one calendar year and the beginning of another as a time to take stock, make resolutions, look to the future, and hopefully do better next year. An incident on Thanksgiving got me thinking about preparation. Success is described as the intersection of luck and preparation, so here's my tale about Thanksgiving-which I promise I will relate to real estate.
My mother was Greek, so holidays are about FOOD at my house. It is my unabashed goal to put those at my table on Thanksgiving into a turkey coma just in time for kickoff of their favorite games. Preparations begin the week before, with ordering the fresh turkey from my local butcher, Erv, getting in the yeast to bake Greek bread, buying cranberries and vegetables, figuring out what kind of pies and salads, etc. On Monday, I picked up the turkey; on Tuesday I made pie crust (from scratch, of course-do I want to hear my mother spinning in her grave?); on Wednesday I baked the bread and pies, cooked the cranberries, made a frozen salad, made the stuffing; on Thursday I stuffed the turkey and put it in the oven and started in on peeling potatoes and the vegetable casseroles. I needed milk for the baked corn, so my always helpful daughter ran out to the supermarket to get it. Here's what she encountered at our local store: a woman wandering the aisles, with a cart which had: a large frozen turkey, fresh cranberries, pie crust mix, pumpkin in a can, and various other items. The woman was in search of the evaporated milk (for the pumpkin pie, for my novice cooks). Lauren gave her directions, and the woman asked: "Do you by any chance know how long it takes to cook a turkey?" Lauren replied: "Well, it's 20 to 25 minutes per pound, more if you stuff it….but your turkey is frozen." Woman: "I can't cook it frozen?" Lauren: "Um, well, no." Note to novice cooks: there are lots of reasons you can't do this, not the least of which is that certain innards of the turkey are inside the turkey, in clever little paper sacks, waiting for you to pull them out. Defrosting a turkey takes at least one full day using the cold water in the kitchen sink method; 3-4 days using the refrigerator method. And that's just the turkey-pies cook at 425; turkeys at 325, so they can't inhabit the same oven at the same time. Lauren asked: "So, when are you planning to have dinner?" Woman: "I told people to come at 1:00." Folks, it was 10:00 a.m! I'm betting they ate pizza, or ending up going out.
Well, what does this have to do with real estate? Being prepared! Agents constantly get themselves into bad situations which get worse quickly because they are not prepared. They don't have the correct paperwork; they don't have marketing materials; they didn't remember to do something, etc. Now part of preparation is planning. Thanksgiving comes every year. Ditto for Christmas and New Year's-and Halloween and St. Patrick's Day, for that matter. It doesn't matter-it's a sure thing. And every year, I think, we want to do better as agents. We want to close more sales, make more money, take more vacations, etc. But we don't get there, because we're not prepared. We're down to the waning weeks of 2008. Take a break from what you are doing (and most of you have mentally stepped away from real estate to immerse yourselves in holidays, or worse yet, self-pity over the market), and figure out what you are going to do in 2009. Be prepared for next year-remember we set our own tables-is yours going to have the full turkey dinner, ready on time-or are you going out for pizza?
To read some of Melanie McLane's specific ideas about being prepared, visit www.OnlineAgentResource.com;, where she is a constant contributor. This members-only web site is full of everything you need to succeed in real estate. If you like it, and want to subscribe, use the code Melanie to get substantial reductions.
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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The other day, I was going into the local supermarket when I met Jane, an old friend and client. She
immediately asked me (as so many do!) "How is the real estate market?" There was genuine alarm
in her voice. I said: "Fine." She looked startled, and unsure. I elaborated: "In some parts of the country,
like Florida, and Nevada, and California, the real estate prices went wild." I didn't shock her with statistics,
but the Florida Association of REALTORS(R) pegs the overall inflation for ALL houses in Florida at 172% for
the time period of 2000 to 2005. But, here in North Central PA, where Jane and I live and work, the
inflation for the same period is much, much smaller. And, the higher they went up, the bigger they
are falling. Our market is steady, and would be better yet if we could convince people to quit listening to
the media. It's almost as if a hurricane is predicted for the Florida Keys, and everyone where I live wants
to board up their windows. Get a grip, folks! Let's talk fundamentals: in some markets, we do have
a tremendous over supply. Not so much in the boondocks of Lycoming County PA, where our builders
never went on a tear, building new houses as fast as they could. Our market is A-F-F-O-R-D-A-B-L-E.
Really, really affordable. Our average sales price is still south of $150,000. That's a mortgage payment
of about $700 to $850, depending upon how much the borrower puts down. We have people who
live here who have very stable jobs. Like Jane, who has worked in the local hospital for over 20 years. Or
the teachers we have, or the college employees and professors, or the Penn Dot workers, or the nurses
or the local plants that are doing quite fine (despite the gloom and doom on the news every night). And
all those people have to have houses to live in. From where I sit, I don't see a risk of our values
decreasing; they seem to be somewhat flat, but they are not going down. And like other markets, they
have steadily increased for the 30+ years I have been in the real estate business. I summarized all that
to Jane, and then asked my favorite question: "If you have owned your home 10 years or more, would
you sell it today for what you paid for it?" I never get any takers on that one. Look at the history;
historically, home prices go up. The other thing is that for so many people, their home ends up
being their forced savings plan. They buy it and make payments, and as long as they don't get stupid
about refinancing it every two years, at some point they own it 'free and clear'. That's a good thing.
This economy will recover, because of or in spite of all the government intervention--and when it does, the
happy folks will be the ones who bought real estate now. The ecstatic people will be the ones who bought
investment property now, and let the tenants pay it off for them. Consider that concept, if you
have been opening the envelopes from the brokerage house or the 401K folks with trepidation
and fear. Real estate is the ONLY investment someone else will buy for you. We call those folks tenants.
And, with the market changing as it has, meaning that Freddie and Fannie have found religion again,
and have decided not to loan money to people without (gasp!) a job, credit and some money, more
than ever, some people will have to rent. If you are in a position to invest, do so, and let those folks
pay off YOUR mortgage.
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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It's the height of summer produce season, and my garden is bursting. I walk smugly past the signs in
the supermarket: "Green Beans-Special $1.29 a pound". The roadside stands have them for about
$1.00 a quart, if you are lucky. My garden has them for FREE! And, as I smugly remind my husband as
we enjoy beans and other goodies, all it cost me was $1.29 for a pack of seeds. That, and some work-
roto tilling, mulching with grass clippings from the mower, watering, some Miracle Groâ--some weeding,
but I'm up to my ears in green beans, yellow beans, cucumbers, cherry tomatoes and-my new favorite
regular tomato-"Mortgage Buster"-named, I sure, for how prolific this plant is-if you sell the
tomatoes, they'll help lift your mortgage. I don't sell my produce. I enjoy it (I graze on the cherry tomato
plant, and all I need is a salt shaker for the other tomatoes); I freeze it and I share it with friends and
neighbors. Please don't irritate me, by the way, by asking if my vegetables are 'organic'. All vegetables
are organic! If you don't believe me, see 'organic' and 'inorganic' in the dictionary. But, mine are grown
without pesticides, herbicides and other nasty things. Sandy, our yellow Lab is on constant rabbit patrol
(which is why I have beans, and my friend Barbara doesn't-the rabbits crop hers off at about 2").
So what does this have to do with real estate? Plenty! Trick question: "What's easier for a real estate agent-going out every day and reinventing the wheel by convincing total strangers that they should know you, like you, trust you and become your clients OR plucking your clients from the list of people who know you, like you, trust you, and need you again-or have a friend or relative who needs you?" Answer, if you have a pulse: "DUH!" That would be why the word 'farming' in real estate means the process of diligently tending to your past clients, and diligently working either geographical areas, social networks, a group of people who already know you, etc, etc, etc and marketing to them. Telling them you are there. Letting them know you can help with their real estate needs. Stopping by to see how great that house you sold them looks since they deep sixed the Pepto Bismalâ pink in the bathroom. Clipping out stories about their kids, and sending them with a personal note. Yes, farming is work, but the rewards are huge! But what is the state of real estate? Well, two scary things I found out during the past year. First of all, while speaking at the NAR convention, author Seth Godin stated that less than 10% of all REALTORS® contact a client after closing. At all. Ever. Not even sending the Lowe'sâ 10% off card. Some of them, who are surviving somehow, are probably wondering on occasion why those folks never came back to them. Then, while rewriting the REBACâ e-Buyer course with my friend Amy Chorew, we discovered that less than 10% of all REALTORS® have a good, clean, useable data base. We are defining, by the way, a good, clean, useable data base as one in which all the people are still alive; the phone numbers and addresses are current, and they would, if you contacted them, have a clue about who you are. So, this means, in this market, which is tough in many parts of the US, agents are choosing everyday to do things the hard way-not the easy way. I garden, because I love to. I farm, because this is my career. I've been gardening for over 30 years. Same thing for real estate. When you eat your next fresh vegetable or fresh fruit, think about me, and farming.
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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I got a call the other day from an agent. She was angry, with cause, about something another
agent had put into our local MLS. Now, for the faint of heart, I’m going to talk about the dirty little secrets
of real estate here, and I’m going to call them as I see them. If you are thin skinned, you might not want
to read on. Here’s what happened: Agent X, from another company, put a new listing in the MLS. Under
the Buyer Agency Fee offered to cooperating buyers’ agents, he had X%**, except for three particular
agencies (which he named)—to those companies he was offering a fee that was less than X%. We’ll
call this offer of compensation Z%. I might add that X appeared to be a number that might have
represented half of his gross commission, although I have no way of verifying that. I will add that X is a
number frequently seen in my MLS as a cooperating fee offered to buyer agents.
Our local MLS pulled the listing, and hopefully slapped his wrist. Not because of what he is offering—he can offer whatever he wants. It’s just that if he wishes to alter his offer of compensation to one or more particular companies, the protocol is to notify those brokers in writing, broker to broker, e.g. “It says X% in the MLS, but be advised we are offering your company Z%”. The agent who called me said: “I can understand why he is offering only Z% to companies A and B; Z% is what those companies are offering everyone else. But our company doesn’t do that, and I don’t like us to be singled out.”
She was pretty annoyed. Before I go further, into what I really want to get to, let me remind everyone of some truisms with respect to commissions:
Ø Every state (as far as I know) requires brokers to negotiate commission rates with sellers.
Ø It is a major violation of anti-trust to talk about a commission in terms of “we charge what everyone else charges” or “we pay the same co-op fee everyone else does”.
Ø That being said, there is an incredible herd mentality in real estate. The two companies who are offering Z% both belong to an adjacent MLS, where Z% is what I have observed as being most commonly offered.
Ø If you offer compensation in the MLS, and I accept your offer of compensation by selling your property, you must pay me what you offered.
Prior to accepting your offer of compensation, I can certainly contact you and negotiate a different fee [Standard of Practice 3-3
Standard of Practice 3-2 does not preclude the listing broker and cooperating broker from entering into an agreement to change cooperative compensation. (Adopted 1/94) ]
Ø Smart agents work exclusively with buyers and sellers; as I like to tell my students: “Don’t ever let some seller’s agent tell you what you are worth!”; when I sign up a buyer client, we negotiate my fee, and my clients know that if the offer of compensation in the MLS is less than that, we’re making up the difference somehow—either my client writes a check, or we will structure the offer with closing cost assistance coming back to my client so he can pay me the difference.
That’s all well and good, but here’s what I really want to get at: one of the dirty little secrets of real estate. Here’s what it is: even though the REALTOR® Code of Ethics says in Article One that a REALTOR® must put his or her client’s needs above all others, including his own, and even though SOP 1-12 says:
Standard of Practice 1-12
When entering into listing contracts, REALTORS® must advise sellers/landlords of:
1. the REALTOR®’s company policies regarding cooperation and the amount(s) of any compensation that will be offered to subagents, buyer/tenant agents, and/or brokers acting in legally recognized non-agency capacities;
in real life, agents gloss over this. I sometimes wish, like on the old “Bewitched” TV show, we could administer a truth spell to REALTORS®. Remember that truth spell? Once Samantha, the witch put it on the mortals, they could only speak the truth—no matter how damaging it was to them personally. Imagine, if you will, a conversation with a REALTOR® under this spell:
Seller: “What’s this number here—it’s less than your commission?”
Agent: “Oh, that is the buyer agency fee our company is offering to other companies who sell your house.”
Seller: “Hmmmm—you are charging me X%--this number isn’t half of X—let me see it’s—well, it’s somewhere around 40% of the gross fee. Why is that?”
Agent: “We like to discourage other agents from selling our listings. See, I make the most money if I sell your house on my own. That’s called a double-dipper. Plus, it keeps the broker happy when we don’t share commissions with other agents.”
Seller: “Well, I really want all the agents out there working on selling my house, not just you and your company.”
Agent: “Look, are you going to be a pain about this? If you are, I’ll cave and grudgingly offer the other agents half of our commission. Of course, then I’ll put your listing in my pocket and keep it there until I show it to all my buyers. Then I’ll share it with the other agents at my office, and they’ll show it to all of their buyers. If we still don’t sell it then, we’ll put it in MLS and offer half the commission.”
Seller: “But I want my house in the MLS right away. I want it on the Internet. I want it at realtor.com.”
Agent: (Sighing!) “All right, all right. We’ll do it your way, but I won’t be happy about it. I may have to not
return other agent’s calls about showing your property so I can try to sell it myself.”
[Let’s violate another one: Standard of Practice 3-8
REALTORS® shall not misrepresent the availability of access to show or inspect a listed property. (Amended 11/87) ]
Seller: “I don’t understand! I thought you wanted to sell my house quickly, at the highest possible price, and with the best terms and conditions for me.”
Agent: “I said that, but I don’t mean it. I really want to sell your house at the best price, terms and conditions for me.”
Wow! How scary is that! But here’s the bigger question—how true is that? You see, I’m fairly convinced that few agents sit at the listing presentation and actually explain company policies as they should, in accordance with SOP 1-12. Yet here we are, in a tough market in many parts of the United States, and instead of doing everything possible to sell listings, some agents are still putting greed ahead of their client. Ask yourself this: if you were a seller, and you really understood the process the way we do, wouldn’t you want your property to be made as appealing as possible to all agents, especially buyers’ agents? What do relocation companies do in a tough market? They ask the agent what the ‘prevailing commission rate’ is (their term, not mine). They then tell the agent they will pay a fee in excess of that rate, and instruct the agent how the fee is to be split. Guess what? It always amounts to an incentive for a buyer’s agent.
Here’s my final point: we are in a sea change in our business like I’ve never seen before in my 33 years in the business. Consumers know more and more everyday about what we do, how we do it, and how we get paid. How in the world are we demonstrating our value to the consumer if we insist on playing games that benefit only us?
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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“Come and listen to my story ‘bout a man named Jed, poor mountaineer, barely kept his family
fed.” I can’t get the theme song from “The Beverly Hillbillies” out of my head these days. What’s
putting it there is all the hoopla and activity in Lycoming County (and Tioga, as well) over natural gas.
The gas lease folks have been diligently tracking down owners of land, trying to sign them up for
leases. There are rumors of large ‘signing bonuses’ and royalty payments in excess of 15%. It has made
our once quiet county courthouse Recorder’s Office a hotbed of activity, and there are rumors Mrs.
Annabel Miller, the Recorder of Deeds, actually had to tell some of these folks how to behave. (!) New
computer terminals were added; and the title searchers who work there all the time mutter about
books being misplaced, some say on purpose. All the gas company representatives are looking for the
same thing—parcels of land, the larger the better, which still have gas and oil rights intact. That in and
of itself is interesting—the title searches go back 150 years for this stuff, and I am told that on several
parcels, the rights have been sold or leased more than once. Whoops!
Why here in north central PA? Well, we sit on Marcellus black shale, which runs from the southern tier of New York into West Virginia. According an article online from Penn State University, the Marcellus shale could (optimistically) contain 516 trillion cubic feet of gas. The other attractive part of the Marcellus shale is that there are fractures in it. The fractures allow drillers to drill vertically, but then branch off horizontally, and this is considerably cheaper ($800,000 versus $3 million), according to PSU geoscientist Terry Engelder. The article I found you can read as well, at: http://live.psu/edu/story/28116. The big news locally, and of interest to you and me, is what it is doing to our real estate market. There are rumors on top of rumors about lease prices, sale prices, estimates of royalties, etc. I can affirm that I know of two sales that were upset at the last minute by an owner deciding maybe he didn’t want to transfer those rights. A parcel priced for $190,000 one day jumped in asking price to $5 million after an oil and gas company rep talked to the owner. So, owners are sitting tight, preferring to gamble on the future value, rather than sell today. Yet a broker friend in the Northern Tier asked my husband a good question: “Has anyone actually seen someone with a big check from a gas company yet?” I haven’t personally; yet some reliable people I know claim to have. Brokers and appraisers with a grain of sense are refraining from trying to value these rights; just last week I appraised a 40 acre farm for an estate. Thankfully, the decedent had already leased the mineral rights—but I had told the executrix going in: “I don’t value minerals, gas, oil, or timber.”
Of course, we are all optimistic. We’d love to have several Jed Clampets right here in our backyard. The Mr. Drysdales of the region would be thrilled—they already are. Local banks, local law firms, local stock brokerage companies are all busy offering seminars about gas leasing and how to handle new found wealth. The attorneys have taken a page from the REALTOR® playbook (“When the market changes, find another niche”) and some who last year were divorce or elder care or criminal experts, this year are gas lease experts. A full scale gas exploration and pumping operation could pump gas out of the ground and money into the local economy. One rumor says there are plans to build a pipeline from here to New York City, employing 30,000 people at $35 per hour and up—and once the pipeline is there, it will pump for 100 years! Who knows? I don’t pretend to be a geologist. I do know as a REALTOR® and an appraiser, that we can’t begin to estimate the effect on value of these things until the dust settles. We won’t know the value of these rights, as it affects market value, until we can observe parcels sold with and without the gas and oil rights. Another appraiser friend has done some research and tells me Pennsylvania law regarding oil and gas rights is light years behind other states; that here in PA you could actually have the gas pumped from under your land, by a well located on an adjacent parcel, and get little or no compensation. If you have a large tract, and you haven’t signed a lease, I would say: “Do your homework.” It appears that this situation is just continuing to snowball, so you probably would not lose by waiting. There are some owners who signed leases last year for under $1000 an acre who are now watching their neighbors sign leases for $2500 an acre. As in any market, timing is everything.
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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I just finished doing a day and a half of board orientation for my local association of REALTORS®, West Branch Valley. Our association is small (about 240 members) so we do this every six months. Despite our efforts to orient new members as soon as we can, there were some in the class who had been in the trenches at least a year, or even more.
New people come into our business with much hope, great expectations, and, sometimes, an unrealistic picture of what the business entails. Here in my state of Pennsylvania, if one hundred new agents are licensed on January 1, by December 31, fifty are gone. By December 31 of the following year, another twenty-five are gone—leaving us with 25% of our original group. Yet, year in and year out, hopeful new agents show up at orientation. Some of them do make it. They show up at other classes, and the smart ones figure out pretty quickly that Fundamentals and Practices gets you through the test, but learning how to list and sell real estate is something else entirely—and it calls for ongoing education, as well as a lot of on the job training. Even the ‘seasoned’ agents like me (30+ years and counting) learn something new everyday.
I asked my students this time to tell me what they had learned in orientation that they didn’t know; and what they would also like to learn. Their answers were interesting. My portion of the orientation is Code of Ethics, plus general REALTOR® information, as well as a quick review of our most popular standard forms (Agreement of Sale, Buyer Agency Agreement, etc). For the past several years, I’ve quickly gone through a slide show of pictures taken in my years as an agent and an appraiser—because the one thing I find, everywhere, all the time, is that when I ask new agents: “Has anyone ever taken you out into the field and shown you how to look at a house?” the ‘yes’ answers are 1% to 5% of the attendees. Stupefying, isn’t it? My slide show is very basic—things to look for, building materials, what an asbestos roof looks like, and wears like, compared to a composition asphalt roof. Most of the attendees said that they learned a lot about the Code, including arbitration. One person honestly said: “I didn’t know anything about Ethics before?” (Are the brokers reading this hearing that?) More important, if you are a broker, are the things we don’t cover, and they want to know. Here’s a list of the highlights:
§ Multiple offers and what you do when they come in
§ Financing (several students cited this)
§ Agency
§ Electronic advertising, including craigslist
§ Anything electronic or Internet based
§ More information on web site stats—how effective is a website, what percent of people search online
Several said they were glad I showed them realtor.org and parealtor.org, which are membership websites; one was glad I told them about District Conferences and our Triple Play Convention.
Here’s my point, and it is directed mostly to the brokers—the people that hire these fresh new agents, full of hope, desire to earn money and do well, ambition to have a better job than the last one—please—start doing your part. You see, the educators like me can’t do it all. Oh, I shamelessly promoted GRI, ABR and SRS courses at orientation—I always do because I think those designations are the most valuable to a new agent. I told them when the next CE cycle comes around to use their ‘butt time’ wisely by taking a course that will help them sell more real estate. I directed them to our District conference (this year my conference’s keynote speaker is Terry Watson, and if he can’t energize you, you’re dead!) and to the Triple Play Convention. I told them they can attend state or national REALTOR® meetings just because they are REALTORS®. But, I can’t do it all. Quit hiring these people if you don’t intend to train them. If you don’t have a mentoring program, why not? Can you really afford to lose 75% of the people you hire and train (and train seems to run the gamut in our business)? In other words—our market is tougher, and our business calls for more professionalism than ever before. If you are a broker, the buck stops with you. So please—do your job—and by the way—if you send them to an educator, we’ll do our job, too.
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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I just returned from the annual Memorial Day Services at our local cemetery, in my little town of
JerseyShore PA (situated in north central Pennsylvania). This year's services were poignant. My favorite
uncle,Jim Mercury, passed away this past March. Uncle Jim was a proud Navy reservist, and a "Tin Can
Sailor" who served in both the Atlantic and Pacific during WWII. For many years, he was an active
participant in the annual Memorial Day services. This year, the Veteran's Council presented a plaque in
honor of him to my cousins, his sons. Memorial Day was always important to my Dad, an Army Veteran,
gone now since 1996, as well as this uncle and many others. As a young person, I spent what seemed
to me to be waytoo many Memorial Days marching up a steep hill in the local high school band,
sweltering in a black wool uniform and standing through what seemed to be interminable speeches. I
haven't been to a service for many years, although, like others in my small town, I make sure all the
family graves are adorned with flowers and looking their best---remembering that this holiday was once
"Decoration Day". It was a shock to see how aged so many of the veterans participating looked. And, of
course, the WWII vets are dying daily. Even the Vietnam Vets (my generation) look older, receding
hairlines, paunches, and (on two) still the long ponytails, under the military cap. I was seated near a
grizzled veteran of WWII and Korea, who muttered under his breath about that 'long hair'. I wanted to
turn to him, and remind him (gently) that regardless of the hair, or lack of it, they are there--just as a
few young people in uniform were, scattered through the honor guard. I saw the Mother of a young
man from our church, killed in Kosovo. I admired her for her ability to endure yet another service. She
too was there, giving witness to her history.
Today's service was beautiful. It was quintessential small town--small towns do these things so well--
complete with a combined band--greyhaired former band members mixed in with high school kids, all
wearing (to their relief, I'm sure) polo shirts and pants. The sky was blue, the temperatures were in the
60's, the birds sang and the sun shone. I'll spend the rest of the day doing what I like best--puttering
in my garden, cooking a relaxing meal for my family...but remembering that I can live here, in these
United States, and pursue the career I want, as a female, live the way I wish, worship as I please,
dress as I please, vote for whom I please...because of the sacrifice of so many. Happy Memorial Day!
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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It's the end of the real estate agent CE cycle in Pennsylvania, and probably not a minute too soon.
Speaking for myself, I'm tired of hotel rooms, car trips, restaurant meals, and (sometimes) having to
point out that during CE, returning emails on your smart phone is not allowed. The providers are burned
out too--they all offered lots of courses back in January and February, which were sparsely attended, and
in some cases, cancelled due to low turnout. Now it is May; license renewal is by May 31st, and everyone
woke up about 5 weeks ago and said: "Gee, I need my CE!" Classes are pretty much full, and I've had
students show up with colds, flu, and broken bones, just to get the CE done in time. The variety of
courses offered is great; as usual, some students opted to get the least expensive 'butt time' for their
fourteen hours and paid little, expected less, and hoped they would get out early. So I hear--those are
not my classes. My providers (the schools and associations who hire me) charge reasonable rates, but
both the providers and I have high standards. And no, there is no getting out early.
Tomorrow I'll be teaching the REBAC eBuyer course, which I just re-wrote with Amy Chorew. It's a fast
and fun 7 hours, very informative and full of ways for agents to improve their business. And not a
moment too soon--according to Inman News, NAR just unveiled their annual report about agents and
income--the bad news is in--agent income is down. Experienced agents, NAR reports, make more money.
That's no surprise to me. I teach real estate in a state, where, if we license 100 people on January 1, by
December 31st of the same year, 50 are gone. By December 31st of the following year, another 25 are
gone, leaving one quarter of our original class. With those odds, you would think new agents would be
hungry to learn all they could---and some are. Sadly, some aren't. They were seduced into this business
by a fantasy--real estate agents drive around in immaculate, late-model cars, show beautiful, well-kept
homes owned by very reasonable sellers to equally reasonable buyers--and then get to keep every
penny of the commission. If you are in the business, you know how far off the mark that is--this is a
tough business. Some REALTORS drive trucks and Jeeps; some houses are more like hovels; some
sellers are downright unreasonable--and some buyers are worse. And finally, after splitting with the broker
and any co-op agents, and paying your own taxes, your own health insurance, your own gas, your own
signs, business cards, MLS dues, etc.--well you get to keep some of that money. So every CE cycle, I
ponder the same things over again--if agents have to take 14 hours of CE anyway--why aren't more
of them taking courses that could actually help them be better at their job? Why aren't they showing up
to learn to price, to learn to market, to learn negotiation, etc. Why are they stuck in the mold of
taking courses whose titles they can't even recall? In defense of my best students, they aren't all
on this page. I have some great students who will be in class this summer and fall--taking designation
courses like ABR, GRI, SRES, SRS--and getting a 'three-fer' here in PA--broker credit, CE, and part or all of
a designation. Those folks never worry about getting their 14 hours--they always have more than their 14
hours. That's because, even if they have their CE, if a good course comes around--they take it--on the
chance that they'll learn more....and earn more.
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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Yesterday was a political junkie’s dream come true. We had massive chatter about what to do about
Michigan and Florida’s mishandled primaries; we had Eliot Spitzer get caught with his pants down
(sorry, I couldn’t resist), and Silda Spitzer singing “Stand By Your Man” (she must have taken lessons
from Hilary Clinton). Of course, we also had the spectacle of what happens when the geeky brainiac
girl thinks the hot jock will actually go to the prom with her, as demonstrated by Barack Obama’s
emphatic statement to the world at large, and particularly, Hilary Clinton: “I am not running for Vice-
President!”
As a Pennsylvania resident, it is both amusing and bemusing to find out that after a 30+ year hiatus, my state will ‘count’ again. And, as I look at the mess in Michigan and Florida, caused by the Democratic National Committee and Howard Dean, I’m reminded of Will Roger’s quote: “I don’t belong to an organized political party; I’m a Democrat.” This is to the backdrop of Al Sharpton singing his theme song of “It’s Not Fair”. The idea that the voters in these two states should shoulder the cost of another primary is absurd. For whatever reason, the Democratic leaders thought Iowa and New Hampshire were sacred cows when it came to early primaries and no other state should mess with that. I guess they missed the day in Civics class when the teacher covered states’ rights. All of these demonstrate the strong need for one national primary day, get it counted, get it over with, and let us move on.
However, as a REALTOR®, many thanks to the Democrats, the primary process and Mr. Spitzer—you have kept the media’s attention away from real estate. This is a true blessing, because when the talking heads start to chatter and bobble, they can talk themselves into just about anything.
I just did an ePRO seminar yesterday in Westchester County, New York. I asked the students: “How’s your market?” Remember, kids, real estate is LOCAL, despite what those folks on TV would have you believe. One student said her company sold more in 2007 than in 2006, and she is ‘very busy’. Another student said it was ‘slow, but not as bad as some times’. Yes, there are pockets of the country that are hurting—the overbuilt places, the ones where they took double digit property inflation as a given, and the pockets where the local economy is bad. And, it isn’t over yet. But—there are some real bargains out there in real estate land, and some buyers are beginning to wake up to that.
In the meantime, I have fervent hopes that politics and sex will continue to distract the media from our business, real estate.
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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I was starting a class today when one of my students asked me: "Is it true that this market is the worst
it's ever been? There are agents in my office who have been in the business 20, 25 years, and they are
saying this is the worst they've ever seen the market." I said, unequivocably: "NO! This market is not
the worst I've ever seen, and it sounds like the agents you are talking about have been sitting down
and 'drinking the Kool-Aid' with the news media." With all due respect to the third estate, bad news
sells; good news is a yawn (most of the time). Additionally, trying to quantify the entire real estate
market across the United States is like trying to give a national forecast. What would you think if you
turned on the weather, and the weatherman said: "It'll be cloudy today, mostly sunny, high of 90, low
of -10, showers likely, snow up to 4 feet, followed by freezing rain and tornadoes." You'd think the guy
was out of his mind! And you'd be right! Real estate markets are local in nature;not only are they local,
but within any given market area, there is usually a lot of diversity within that market.
My real estate students intinctively understand this when we talk about it, and I ask: "Do you have any
price ranges where you can't keep inventory? You still have more buyers than houses? What about
another segment of the market? Do you have a segment where sales are sluggish, because you have an
oversupply?" They nod in agreement, and here is the 'Aha!' moment--when I ask: "Do you have any
sellers who have a house to sell in that price range that is moving quickly...and they want to move into
a price range where sales are more sluggish?--it doesn't get any better than this--you get to sell in a
sellers' market, buy in a buyers' market, and finance at historically low interest rates." In my market--
north central Pennsylvania, primarily Lycoming and parts of Clinton Counties--are markets are not bad.
In fact, they are nowhere near as bad as I have seen them on other historic occasions. Some of our
price ranges are saturated and have an oversupply; one of the upper price ranges in Lycoming County
has a three year plus supply listed. But, some price ranges have a six to nine month supply listed;
which, going into the spring, isn't that bad. So...don't sit down and drink the Kool-Aid just because
someone asked you to--check out your facts first, and then you be the authority
in your own market.
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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Pricing real estate has never been a more important skill than it is today. Yet, when I stand in front of a room full of students, I can tell by their faces that I'm the first person presenting basic fundamentals of pricing and valuation to them. In many states (including mine, PA), the day we give a real estate salesperson's license out, we empower that person to go out the very next day and price a home for sale! This is scary--one of the reports I read within the past week was the case of a disgruntled homeowner suing the agent for allowing them to pay too much for the home. In virtually every state, pre-licensing real estate courses are 'taught to the test'--in other words, instructors teach what students need to know to pass the test. Yet, virtually any new agent you talk to will agree that the courses did not tell them how to actually sell real estate. Never has education and training post licensing been so important for an agent's success. The course I taught last week was a CE course I wrote, entitled: "What's it Worth?" As I type this blog, I'm in a hotel room--tomorrow I'll do a GRI "Pricing and Evaluating Real Estate". Here's my point: if you are a new agent, a seasoned agent, or even a successful, seasoned agent--you can never learn too much about anything--including pricing and valuation. There is an old adage in real estate: "A property priced properly is half sold already." Pricing property properly for a seller leads to satisfied clients and listings that sell. Pricing property improperly for a seller usually leads to frustration on both parts--you can't sell it, they won't reduce it and everyone gets to be miserable. Pricing property properly for a buyer leads to satisfied clients that will return to you to sell the home, because you didn't let them overpay--or if they did overpay, you told them they were! Allowing a buyer client to overpay for a house is not only a violation of your fiduciary duties to your client, it's a stupid way to practice real estate. I've written several articles and courses on pricing property, and I've got a new course in the works right now. If I'm not in your neighborhood--find a qualified instructor and course near you and figure out how to do this right. And, if you are a consumer, it goes without saying that you ask the agent several direct questions: "How will you arrive at a price for our home?" "How long have you been in the business?" If not long, ask: "Is there someone at your office with more experience who will help you price my home?" "What factors do you consider when you price a home?" "What homes are competing against mine?" "What is the average list price/sales price ratio in my segment of the market?" "What are the average days on market?" By the way, if you are an agent, and you can't answer these questions--you better learn how!
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, SRS 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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Well, it is almost the end of January, and so far, I've kept some resolutions (hooray!). One of my resolutions this year was to keep better records. This was precipitated by the fact that we had to file our federal taxes late (we got an extension) because my husband had an emergency appendectomy just before tax time. Plus, I found I was often puzzled with the question: "Where did all that money go?" I'm combining low tech and high tech. Low tech: I have a small notebook I carry with me everywhere which slips into a clear plastic case which closes and holds loose papers. In there go all the receipts as well as notes, e.g. cash, credit card, ATM, reimbursed, non-reimbursed, etc. High tech: I have done an Excel spread sheet where I'm recording the same data. My late mother-in-law, for all the years I knew her, lived very frugally, and always recorded every penny she spent. I can't honestly say I'm recording every penny, but it is enlightening to see where the money goes. I'll let you know next April (2009) how it ends up working for me! On a more sobering note, I have to think that my generation (Boomers) would be going into retirement in better shape if we had ended up with the same financial values as our Silent Generation and GI Generation parents. As we teeter on the edge of a recession (or so the economists are predicting), it occurs to me that in a country where 40% of the population doesn't remember when someone named Bush or Clinton wasn't President of the United States, we certainly have a lot of people who don't have any memory of 'hard times'--or even stagflation. We are careless with our money in our culture. We spend more than we earn; we have too high balances on our credit cards; our national savings rate is close to zero. . .and many Americans have bought (and borrowed for) way more house than they could reasonably afford. As a long-time REALTOR, I can remember when we used to print off an amortization schedule to give the buyers at the closing--we would then show them how to drop down to the next month, and make a principal payment, thus saving hundreds of dollars of interest, and paying the loan off early. (For newer agents: the bi-weekly mortgage hadn't been invented yet. ) We passed on to our clients the goal of owning their home free and clear--as soon as possible. We promoted a home's investment value based on the premise that a buyer would pay it off, keep it paid off, and thus (some day) go into retirement with a nice asset. A huge part of the mess we are in now is because people speculated in real estate. They bought property expecting that double digit appreciation would continue indefinitely, and the plan was to sell and get out, take the profits and run. Obviously, it didn't work that way for a lot of people. And, on top of that, they weren't speculating--or gambling (let's be honest) with 'mad money'--they were betting the family home. As REALTORS, let's encourage financial responsibility with our clients. Let's not urge them to buy more house than they can afford. Let's show them the benefit of paying a mortgage off early. Let's emphasize that the family home is many things--but a vehicle for speculation and quick profits is not one of them. let's urge everyone to get a little notebook and start figuring out where their money is going--and maybe resolve to save more of it.
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES SRS, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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