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The differences from past generations will have a significant impact on housing needs over the next 10 to 20 years

RISMEDIA, October 17, 2006—Baby boomers have a wide variety of housing needs in the future, depending on their retirement plans – or lack thereof – according to a study by the National Association of Realtors.

Most of the 78 million baby boomers are far from retirement, with diverse plans and timelines, resulting in different housing requirements and significant shifts from patterns established by earlier generations. The comprehensive study is based on a survey of nearly 2,000 American baby boomers born between 1946 and 1964 – the largest generation in U.S. history; the survey was conducted for NAR by Harris Interactive.

David Lereah, NAR’s chief economist, said baby boomers are living longer and are different from previous generations because they have no set path for retirement and have more varied circumstances in life.

“The differences from past generations – and between baby boomers themselves – will have a significant impact on housing needs over the next 10 to 20 years that is very different from the World War II generation, and many boomers simply don’t know how they’ll retire,” Lereah said.

“A significant portion of baby boomers married later in life and had children at a later age, which means many will continue to work beyond the traditional retirement age,” Lereah said. “Older boomers are thinking about retirement, but one-third expect to go back and forth between periods of work and periods of leisure, and another 35% want to work at least part-time or start a business – all of this will have an impact on the kind of homes they buy as well as where they buy them.”

The median age at which baby boomers expect to stop working is 70, but 27% say they never intend to stop working.

He said most baby boomers are currently in the workforce, a good portion of them have children living at home, and boomers remain a driving force in the housing market. “Just over a quarter of the boomer generation is aged 55 to 60, which is when many people traditionally begin to focus on their retirement plans, but analysis of the survey suggests they are more likely to stay in the workforce longer and will be less likely to downsize than previous generations – the leading edge of the boomer generation is the key to future housing impact.”

“Because they will be in the workforce longer, boomers will postpone purchase of retirement property and won’t be making those moves as early as assumed,” Lereah said.
Forty-two percent of survey respondents would like to retire in the South, 32% in the West, 15% in the Midwest and 12% in the Northeast. “This tells us that the Sunbelt will remain a traditional draw for retirees.”

Most boomers live in two-income households, with a median income in 2005 of $64,700, which is 31% higher than the median for all households. This generation makes up 37.5% of U.S. households, but receives nearly half of all aggregate household income. “This translates into a lot of purchasing power, and helps to explain why 8 out of 10 boomers are homeowners,” Lereah said.

For baby boomers earning $100,000 or more, the study shows that more than 9 in 10 are homeowners. Among middle-income boomer homeowners, home equity accounts for fully half of their net worth. Even so, 19% of respondents are renters, 37% say they have just enough to make ends meet and 17% say they are having financial difficulty.

A quarter of baby boomers own one or more other kinds of real estate in addition to a primary residence: 13% own land, 8% own rental property, 7% a vacation home or seasonally occupied property, 2% commercial real estate and 3% some other kind of real estate.

Four out of 10 respondents intend to convert their vacation home into a primary residence in retirement. Analysis by NAR shows baby boomers are proportionately more active in the second home market, owning 57% of all vacation/seasonal homes and 58% of rental property.

Ten percent of boomers indicate they plan to buy some form of real estate within the next year, which corresponds with U.S. Census Bureau data that shows 3.5 million boomer households moved during the last year. Two-thirds are considering a primary residence, but the rest are thinking about land, second homes or commercial property.

NAR President Thomas M. Stevens from Vienna, Virginia, said the survey shows most boomers want professional services when they buy real estate. “Baby boomers expect professional service and guidance from real estate agents, and they value those services,” said Stevens, senior vice president of NRT Inc. “When buying a home, they want agents to represent their interests in the complex transaction process, and when selling they want help to establish the right asking price. Regardless of whether they’re buying or selling, boomers want agents to explain all of the complicated contracts, forms and agreements, to manage the closing process from start to finish, and to negotiate on their behalf.”

Most survey respondents were unsure of their financial future, with three-quarters saying they are not financially prepared for retirement and many expressing anxiety about their ability to retire. Some boomers said they might withdraw retirement funds for housing or real estate expenses.

Peter Francese, an independent demographic trends analyst and founder of American Demographics magazine, consulted on the findings.

“For the vast majority of baby boomers, retirement is somewhere off in the future,” Francese said. “Considering that boomers are healthier than their predecessors, and are more likely to work in an office setting, many of them may work five or 10 years beyond the traditional retirement age of 65.”

Half of boomers who live in an urban area would like to retire in a small town or rural area. Their ideal retirement location characteristics include a lower cost of living, being near family, quality health care, better climate and being near a body of water.

More than a third of all baby boomers want to retire in an urban or suburban setting, motivated by quality health care and cultural activities. Half of boomers said they would consider living in an age-restricted community.

Given a longer tenure in the work force baby boomers may choose a larger home than earlier generations, speculates Francese. “Boomers may want or need a somewhat larger dwelling that includes one or two home offices, and a low-maintenance home on a single level would have broad appeal to this group,” said Francese.

Almost one in four boomer households have a high net worth of $500,000 or more, and this ratio is expected to increase in the future as the generation ages. Virtually all high-net-worth households are homeowners (97%), and 47% are likely to also own other real estate in addition to their primary residence. More than a third expect to help children or grandchildren with a down-payment on a home. Wealthier boomers want amenities where they retire, including cultural activities such as museums and art galleries. As a result, they are more likely to retire in an urban area or city.

Although most boomers are married couples and 27% have children under the age of 18, nearly two out of five baby boom households are nontraditional households, most of which are headed by women.

Non-traditional households may have different needs and desires about where they want to live. For boomers with children, neighborhood schools are of obvious concern, but for those without children, security may be a bigger issue.

Twenty percent of boomer households are headed by women, but because women aged 60 to 69 account for a quarter of homeowners in that age group, the number of women boomer homeowners is likely to increase much faster than average as they age.

Francese said there’s little doubt that the vast majority of baby boomers will delay retirement. “Some will put off retirement because they have to, but many because they want to,” Francese said. “Many will have a larger income stream to purchase possibly two homes, which they may use to move back and forth between their retirement life and their working life.”

“However, some caution should be exercised here regarding retirement preferences,” said Francese. “Surveys of future intentions often include a dose of wishful thinking, and attitudes can be influenced by the media and other outside pressures. For example, many are probably not going to be able to, or even want to, retire in a small rural town far from their current home, even if they may dream about it currently.”

Preliminary study results were released May 18 at NAR’s Midyear Legislative Meetings & Trade Expo, with a focus on the real estate and second-home appetite of boomers. The more extensive analysis released is also supplemented with context and data from the Census Bureau’s mid-2006 estimates of population characteristics; it offers an abundance of information helpful for planning to Realtors, builders, mortgage lenders and others connected to the housing industry.

The survey for the 2006 National Association of Realtors study, Baby Boomers and Real Estate: Today and Tomorrow, was conducted online by Harris Interactive between March 31 and April 6, 2006, among a nationwide cross section of 1,969 U.S. adults born between 1946 and 1964. Figures for age, sex, race, education, region and household income were weighted where necessary to bring them into line with their actual proportions in the population. With 95% certainty, overall results have a sampling error of plus or minus 2.2 percentage points; the sampling error for various sub-sample results is higher and varies.

The study can be ordered by calling 800/874-6500, or online at: www.realtor.org/babyboomerstudy. The cost is $50 for NAR members and $125 for non-members.

For more information about Harris Interactive Inc., visit: www.harrisinteractive.com. For more information about The National Association of Realtors, visit: www.realtor.org.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Understanding Compensation and Serving the Client:

Procuring Cause Concepts

Bruce H. Aydt, ABR, ABRM, CRB, SRS

© Copyright, 2004-2006

General Legal Definition:  Black’s Law Dictionary, Fifth Edition:

�¡          “The proximate cause; the cause originating a series of events which, without a break in their continuity, result in the accomplishment of the prime object.  The inducing cause; the direct or proximate cause.  Substantially synonymous with “efficient cause.”

�¡          Within this definition, the second phrase aptly summarizes the basic concept of procuring cause:  “the cause originating a series of events which, without a break in their continuity, result in the accomplishment of the prime object.”  In the REALTOR® system, the “prime object” is a sale or lease of property.

“Arbitration Guidelines (Suggested Factors for Consideration by a Hearing Panel in Arbitration)”, Appendix II to Part Ten of the National Association of REALTORS® Code of Ethics and Arbitration Manual (CEAM)

�¡          The NAR CEAM covers procuring cause extensively in the Arbitration Guidelines.

�¡          The Guidelines set out six “Factors” for panels to consider, as follows:

1.         Factor #1:  No predetermined rule of entitlement

Associations may not have a predetermined rule of entitlement to commission in a procuring cause case, whether written, unwritten or simply “understood.”  For example, before approximately 1970, some associations declared by “policy” that the “Threshold Rule” (first person to show the property) was the determining factor in a procuring cause dispute.  Today, an Association may not have such a rule.

2.         Factor #2:  Arbitrability and appropriate parties

This factor discusses what disputes are appropriate for arbitration and the necessary parties.  Since the Grievance Committee generally disposes of these issues, it is unlikely that issues about these matters will come up at a hearing.

3.         Factor #3:  Relevance and admissibility

This factor confirms the standard for admission of evidence as previously discussed.

4.         Factor #4:  Communication and contact – abandonment and estrangement

Abandonment and estrangement are two critical issues often brought up in procuring cause cases.  They will be discussed in more detail below.

5.         Factor #5:  Conformity with state law

This factor deals with the basic nature of arbitration matters as relying on underlying state law, primarily the concepts of the Uniform Arbitration Act as adopted in various states.

6.         Factor #6:  Consideration of the entire course of events (“The Questions”)

This factor is related to Factor #1.  Not only is there no predetermined rule of entitlement in a procuring cause case, the panel is directed to look at all of the facts and circumstances in the case and NOT decide the case on the basis of any one factor.  To that end, the Arbitration Guidelines include a detailed series of questions that the panel can ask and consider in its disposition of the case.

You should review the Arbitration Guidelines before you sit as a panel member in an arbitration case.  They are attached to these Tips.

Summary of General Procuring Cause Concepts

�¡          Uninterrupted series of events

            ÷         The concept of the “uninterrupted series of events” might be likened to an “unbroken chain of events.”  A chain has links.  Think of the basic nature of procuring cause as a chain in which no links have been broken.

            ÷         Links in the chain might be broken in a number of ways.  If a link is broken, then the person starting the chain in which the link was broken will not be the procuring cause of the sale.  Two of the important ways a link may be broken are abandonment and estrangement.

�¡          Abandonment

            ÷         Abandonment is characterized by some lack of contact by the agent with the buyer for some period of time.  The panel decides whether the conduct constitutes abandonment.  There is no set period of time of lack of contact that is considered abandonment.  The panel decides whether the lack of contact by the agent for the period of time in the case before them constitutes abandonment.

�¡          Estrangement

            ÷         Estrangement has a very specific focus.  If a buyer says only that he/she “prefers” to work with Agent A rather than Agent B, this statement of “preference,” is not automatically conclusive proof of estrangement.  While a buyer may choose to work with any agent, the buyer’s choice of agent is not necessarily determinative of which person claiming the commission is to be paid.

            ÷         Estrangement focuses on the conduct or lack of conduct of Agent B that “caused the purchaser to terminate the relationship.”  The key question is “what did Agent B do or fail to do that pushed the buyer to Agent A?”

Common Misconceptions about Procuring Cause

�¡          Through the years, several misconceptions about procuring cause have developed and often continue to be cited as the “rule” in deciding these cases.  Remember, no one rule determines the case.  The following three misconceptions are sometimes cited by parties in an arbitration hearing as being the “trump card” for their position.  They are NOT a “trump card!”

�¡          The Threshold Rule

This “rule” might be loosely defined as bringing the buyer “across the threshold” of the property.  It also might be known as the “first showing rule.”  Parties who are not familiar with the procuring cause guidelines will sometimes overemphasize who showed the property first as being dispositive of the case.  Alternatively, parties sometimes argue that, because the opposing party didn’t show the property, the opposing party should not be entitled to the commission.  While showing is an important fact, whether a party did or did not show the property, and/or whether a party was first to show the property, are not the deciding facts in the case.

�¡          The Contract Rule

This “rule” argues that the person who writes the successful offer to purchase automatically is entitled to the commission.  Like the Threshold Rule, such is not the case.

�¡          The Agency Rule

The “Agency Rule” is usually presented as the person who has an agency agreement (usually exclusive) with the buyer is entitled to the commission.  The Arbitration Guidelines are very specific that “agency relationships, in and of themselves, do not determine entitlement to compensation.”  While an important fact to be considered, the existence of an agency agreement with the buyer is one of many facts to be considered.  The key learning in this area is that the commission in dispute in a REALTOR® association arbitration is based on the contract between the listing broker and the cooperating broker.  The buyer agency agreement is a completely separate contract between the buyer and buyer’s agent and does not control the conduct of the listing broker, who is NOT a party to the buyer agency agreement.  It is possible that a buyer’s agent may not be entitled to the commission in dispute in the procuring cause arbitration and still be paid a commission under the terms of the agency agreement that has been entered into by the buyer.

How Many Procuring Causes are there??

�¡          The short answer to this question is “one.”

�¡          The question and answer is intended to focus on the fact that arbitration hearing panels should not generally split awards between the parties.  In general, the panel should award the commission on an “all or nothing” basis.

�¡          The CEAM does permit a panel to split an award between the parties if the panel decides that the transaction would have occurred only because of the efforts of both parties.

Code Violations, License Law Violations and Procuring Cause

An issue that arises in arbitration hearings is whether possible violations of the Code of Ethics, the license law, the agency disclosure laws/rules of a state or other violations of law can be used in determining entitlement to the commission.

Factor #3 of the Arbitration Guidelines states:

“Arbitration Hearing Panels are called on to resolve contractual questions, not to determine whether the law or the Code of Ethics has been violated. An otherwise substantiated award cannot be withheld solely on the basis that the Hearing Panel looks with disfavor on the potential recipient’s manner of doing business or even that the panel believes that unethical conduct may have occurred. . . . At the same time, evidence or testimony is not inadmissible simply because it relates to potentially unethical conduct. While an award (or failure to make a deserved award) cannot be used to “punish” a perceived “wrongdoer”, it is equally true that Hearing Panels are entitled to (and fairness requires that they) consider all relevant evidence and testimony so that they will have a clear understanding of what transpired before determining entitlement to any award.”

A panel member should NOT make a decision to award the commission to a party based primarily on the fact that the other party potentially violated the Code.  An example of this is a potential violation of Article 16, Standard of Practice 16-13.  Standard of Practice 16-13 requires that, before providing a substantive service such as writing a purchase offer, the REALTOR® must ask the prospect whether the prospect has an exclusive representation agreement with another REALTOR®.  Assume a panel member votes to award a commission to REALTOR® B on the basis of this logic:  “REALTOR® A forgot to ask whether the buyer had a buyer agency agreement with another REALTOR® and therefore I will not award the commission to REALTOR® A but give it to REALTOR® B.”  This reasoning is flawed.  The panel member should NOT refuse to award the commission to REALTOR® A primarily on the basis of REALTOR® A’s failure to ask “the question.”

A similar situation arises with agency disclosure rules.  For example, assume REALTOR® A forgot to give a disclosure about dual agency that is required law.  It is incorrect for a panel member to vote to refuse to award the commission to REALTOR® A primarily because they failed to give a proper agency disclosure.  However, it is possible that REALTOR® A’s failure to give a proper agency disclosure may have caused the prospect to terminate their relationship with REALTOR® A and seek out REALTOR® B, with whom they wrote a purchase offer.  If this is the case, REALTOR® A’s conduct might be seen as an estrangement of the prospect and thus the panel member may decide not to award the commission to REALTOR® A because of the estrangement and NOT because of the potential violation of the agency disclosure laws/regulations.

The Seller Counseling Session - The Key to Listing Success

By Adorna Carroll

© 2006, Adorna Carroll

An integral part of the listing presentation is a seller counseling session, which focuses not only on your marketing capabilities, but also on the necessary legal disclosures, contractual expectations, agency relationships, cooperating relationships, office policies and procedures, and the in-depth knowledge you can impart – all things that differentiate your service package from your competition.

The purpose of the session is to thoroughly review the marketing and sales process with the seller, review what can and cannot be done for them, establish realistic expectations on the part of the agent and the seller, disclose all legal agency relationships, including fiduciary duties, and review all legal documents.

In outlining to the seller what can and cannot be done, it is important to convey that although you can provide options, alternatives and ramifications to actions, you are not in a position to tell the seller what to do.  This may be a departure from days past when this was considered part of the service.  The legal ramifications are immense and no responsible practitioner would consider this part of their duties today. 

When discussing with the potential seller what the practitioner can and cannot do, you should discuss how fair housing laws apply, the importance of disclosing material facts and the property condition disclosure statement, Megan’s Law issues, disclosure of rebates from third-party business relationships, and client fees that are in excess of the commission.

It is vitally important to explain your company’s office policy on agency relationships when discussing options with the prospective seller.  All listing agreements should have conceptual agreement, depending on the office policy of the firm, regarding the availability of various agency relationships, the possibility of dual representation, designated agency representation and permission for the firm to represent more than one buyer client. These issues need to be addressed in advance so that practitioners and seller clients comprehend how agents will act in these scenarios. The parties involved should also understand that informed consent forms will be used in the transaction to memorialize the understanding and agreement of the parties for the modification and/or reaffirmation of fiduciary duties.

It is equally important to explain, during the counseling session, your company’s office policy on compensation and cooperation.  Both the National Association of REALTORS^® Code of Ethics and your fiduciary duties as agent require you to inform the client not only what the total compensation will be, but how it will be split, the amount that is offered to different cooperating firms and how much will be allocated for the listing firm.  In markets where there are subagents and buyer agents participating in the transaction, the compensation might be different and this must be disclosed.

In addition, if compensation is offered to subagents of the seller, it is required by law and the Code of Ethics to inform the seller of the possibility of vicarious liability so that the seller realizes that they are accepting financial responsibility for anything that the subagent says or does on which the buyer relies, even though this information may not be correct. The disclosure of this potential of vicarious liability should be in writing for the protection of the agent and the broker.

If compensation offered to the buyer’s agent is less than the amount reflected in writing on the agreement between the buyer and agent, the listing agent is obligated by the Code of Ethics and lawful disclosure to identify the ramifications of that action and to point out that a clause may appear in the conditions of sale for a “seller-funded rebate” from the seller to the buyer to satisfy the terms of the buyer’s contract. If an office policy does not allow for compensation to certain types of cooperating agents, such as subagents or buyer agents, then the firm is obligated to make that clear prior to the listing agreement being signed.

Two more complex issues that need to be reviewed during the seller counseling session are the seller’s authorization of multiple offers to competing agents and an authorized statement to cooperating agents explaining why the property is being sold. On REALTOR®.org, there is extensive information regarding multiple offers and how they should be handled.  The caveat to remember is that only the seller has the right to determine if the existence of multiple offers should be disclosed to competing agents – this is not an agent’s right to determine.  Having this authorization in writing is crucial for the protection of all parties.  In addition, every buyer wants to know why the seller is selling – having a neutral statement will protect the seller’s confidentiality and negotiating position.

In the “legal” arena, the seller counseling session should include an overview of the laws regarding the presentation of offers (even if they are lower than the seller wants to see or not accompanied by a pre-qualification or pre-approval letter), the timeliness of presentations, the mechanics of contracts versus binding binders and non-binding binders or intent letters, and the counteroffer process.  The pros and cons of contingencies should also be discussed.  It is important for an agent to take into consideration the current economic conditions when outlining the upside and downside of “as is” clauses; inspection contingencies; hubbard (kick-out) clauses, etc. with the potential seller.  Always be careful not to give legal advice and refer the seller to their attorney when the discussion involves their legal rights and liabilities rather than how the transaction works.

Practically, the seller counseling session should provide a road map for the activities that will occur throughout the marketing and sales process including the handling of offers.  It should also define the partnership that is required between the seller and the listing agent to accomplish the primary objective of selling the property with terms and conditions acceptable to the seller. Showing procedures, safety precautions, property condition expectations, lockboxes, signs, advertising and Internet display issues need to be outlined. 

Another key area the agent should counsel the seller on is the inspection process.  Sellers often have the misconception that they, or the listing agent, should be at the inspection.  The agent should point out that not only is this counterproductive to the negotiating phase and protection of seller confidentiality, but it has resulted in lawsuits and out of court settlements for listing firms. The liability can easily be shifted by allowing the buyer agent and his or her client to monitor the inspection process, then issue their request, written report and corresponding repair quotes, if applicable, and allow the seller to act on them at that time. The inspection phase is always an opportunity to renegotiate.  Clients should be made aware that the statistical probability of having to do so will vary according to the economic landscape of the marketplace.

The seller counseling session is a unique opportunity for skilled practitioners to differentiate themselves from their competitors. 

Showing Management Software


Our company just signed on with Showing Solutions
(www.showingsolutions.com). I don't know if they work in your area, but our
fees are $25 per listing unless the MLS # changes. (They have another plan
that's $25/agent/mo. for bigger offices.) For this we publish their number
in the MLS. Agents call SS to request showings. SS calls the seller for ok
of showing. SS calls the buyers agent back to confirm/decline the showing.

This is followed by an automated e-mail request for feedback sent to the
buyer's agent which when returned can be previewed by the listing agent and
then forwarded to the seller or sent directly to the seller. All for a one
time fee of $25. That's the best deal in town. We no longer have to check
voicemail every 15 minutes. It's all done for us. Plus they have an online
area to record your activities for marketing or other communications which
the seller can log into for info. If it's available in your area, it's
worth researching.

Bonnie Erickson

Staging Quotes

>It works because many Buyers...cannot visualize what it could be - they
only see what it is now - and they don't like it. Surely you've had a Buyer
say - I don't like this carpet!! <

Corny but true famous sayings of Barb Schwarz:

"If you can SMELL it...you can't SELL IT!"
"Start packing, because you ARE moving!"
"The investment in staging is less than your first price reduction."
"Detail your house like you detail your CAR!"
"Clutter EATS Equity!"
"You can't SELL it if you can't SEE it." (house hidden inside the
"landscaping"
"Buyers (and appraisers) only know what they SEE...NOT what it is GOING TO
BE!"

One of the weirdest things she said in the class was "We are not selling
HOLES!" She was talking about open toilets. But I swear I hear her saying
that every time I see the open hole of a toilet in an mls photo, and she's
right. Close that toilet before taking the picture.

Staging Befuddlement
From: "Alice Newman" <aliceanewman@cs.com>

Okay, think of this. You go into three different homes and they all look
similar. What is going to stand out to someone? I give the house some
personality if it needs a lift. I have staged houses and have had great
results. When I get a new listing, I walk through the house and look to see
what I have to work with. I ask permission to move furniture, add touches
and stage their house to sell. I've always had success when I've done this.