Are ya gonna blackball me?

The other day, I was informed by a seller that a local real estate company may be blackballing our listing!

My hubby and I just listed my brother-in-law's mother's home in an adult community. There is a real estate company that only works within that community. As a result many of the listings are represented by them.

 Our seller hired a local handyman to perform some repairs on the home and he expressed his concern that she had not listed with the "other real estate company." "Oh, you shouldn't have listed with Turnbloom. The rest of the agents are going to blackball your listing and refuse to show it to their clients! You'll never get it sold!

This is not the first time I've heard vicious rumors of listings being "blackballed" for one stupid reason or another.  But is there such a thing? And is it something we all should be worried about?

Here's my take on it and what we explained to our seller;

If you were a buyer's agent, and that buyer absolutely, positively wanted to see our listing (which is priced pretty damn well, I might add!), AND was ready, willing and able to write an offer, would you REFUSE to show the home?

How about this, if your client wanted to write up an offer on our listing, would you REFUSE and recommend the buyer write an offer with someone else?

I don't know too many agents representing buyers who would pass the opportunity to put bread on their table and pay bills (especially in a market like this!).

For all the "blackballing" rumors I've heard over the years, I believe properties will still sell, as long as there is a willing buyer and seller.

I find agents who "blackball" are usually the ones who need a sale in the worst way (nothing like shootin' yourself in the foot!).

Do you worry your being blackballed and not allowed into the club? Do you think there really is such a thing as blackballing? Or is just another urban myth used to keep all of us in the real estate industry "in line"?

My Humbling Experience

I finally did it...

I reduced the prices of my classes to the lowest of the low ($39.95). After getting little to no action for what I consider to be VERY IMPORTANT STUFF AGENTS NEED TO KNOW, I decided to take the plunge and work in the red for a while.

The real estate market has been such a humbling experience for me. You know, from being at the top your game where everybody loves you, to having doors slammed in your face!

But I really believe I needed to have this experience. Humbling makes me more well rounded and a stronger person. I truly believe that my webinars WILL make a difference in the real estate industry (even if no one else thinks so right now!).

Did you know that Harland David (Colonel) Sanders had many doors slammed in his face for years before someone finally believed in his product and took a chance with his secret fried chicken recipe?

Even more incredible is that he started Kentucky Fried Chicken in his mid 60's!

Sometimes, when I'm having my pity party, I try to remember the inspirational people like the Colonel who did not give up because of a few hundred (thousand?) doors slammed in their face. Their perseverance eventually paid off.

Also, I am trying to allow myself to be more open to opportunities. Even if the square peg is not exactly what I was looking for, I find by being creative and open to new experiences, I can still do what I love.

For example, a couple of weeks ago, I agreed to teach a private class to a couple of new assistants for 2 agents. Normally, I wouldn't do this-too busy, not enough money in it, etc. But I decided to go for it. As a result, I had a GREAT day teaching, and it allowed me to think about offering private training sessions to other agents in need of help. From there, it opened my mind up to dozens of possibilities/opportunities that I would really enjoy doing!

Amazing, immediately after I decided to reduce the costs of my webinars, I received a call from Sacramento Association of Realtors who approved to use my webinars as part of their education program!  

I did ask a big favor of Leon, one the education board members. Was it possible for me to get a job cleaning toilets at night at the association to help supplement my income?  

Hah! Being humble is not so bad!

What you need to know about becoming a Top Producer

  Yesterday, I was invited to train a NEW transaction coordinator for an agent. In meeting the agent, I could tell she was a little rattled. She told me, "I'm really stressed and overwhelmed with everything right now. I've got 4 pending sales and 6 more coming in!"

Ah, I remember those days when my hubby and I first made it to the illusive "Top Producer" circle. "Overwhelming" and "Stressful" are perfect descriptions of how we were also feeling at that time! 

With a sympathetic ear I responded to the agent; "Take a deep breath. You're doing all the right things. You WILL get through this!"

In my years of working in the industry, I've seen some pretty sharp and dynamic agents claw their way to the top only to crash and burn big time. Why? No systems for higher volume listing/sales!

Some agents are able to work well with a certain number of listings and sales, but the service falters once their business peaks beyond this limit. They have no one to help out. They don't know how to train staff and they don't know how to delegate responsibility once they get help!

The reason I believe this agent has a shot at the big time is because she has taken some of the first steps at developing a higher volume business plan. Step 1 is to hire help. Step 2 is to educate your assistant so they can help you! Step 3 is to develop systems with your assistant that are easy to learn and can be applied over and over again to other listings/sales and used by other assistants/staff that are hired in the future.

Some of you may argue the point that you prefer to keep your business model small and more intimate to provide one-on-one service for your clients. "It's impossible to provide great customer service when you have 20 listings." I have to disagree with this statement. My hubby and I started our real estate company committing that our services will provide the best customer service available. How can we do this when we have 24 listings and 10 pending sales? Easily! With our high volume systems that eliminate wasted time and duplicated efforts plus top quality trained staff.

Another Top Producer secret is to use the best technology available for your team (even if YOU don't use it). We save a tremendous amount of staff time by purchasing the fastest copiers, scanners, computers and printers. Internet speed is critical for Top Producers to give and receive information more quickly and good real estate software programs keep the entire team on track with daily tasks. You don't have to have 7 assistants to be a Top Producer! Great systems and one really good assistant will get you to Top Producer status in no time at all!

 Oh, and by the way, we rarely work weekends!

What's with the Kinder, Gentler FHA Loan? (Part 3)

Well, I cannot believe it! After only one extension on the FHA loan approval, the buyers have approval today! Right on time, too! Maybe my perception of FHA needs to change....a lot! I'll keep you posted to the end. Although, it ain't over till it's over, I'm starting to feel better about this transction!

What's with the Kinder, Gentler FHA Loan? (Part 2)

I promised I would give you updates on my FHA transaction I'm working on. The buyer's loan approval was due yesterday (6/3), however-FHA did an appraisal review and they are having a second appraiser go out today. The loan officer did say that they are putting a "rush" on the second appraiser's report to get it pushed through the approval process and the buyer's should get loan approval by Monday 6/9. OK, that seems reasonable. But I am VERY nervous about the second appraisal! The sales price the buyer's and sellers negotiated were well within comps. So what gives?! Is this regular operating procedure? Why doesn't FHA trust the first appraiser (which is their own appraiser)?

If you have any thoughts on FHA loans, please let me know! Meanwhile, stay tuned for upcoming episodes on "As the FHA World Turns."

What's Included in a PITI Payment?

Should first/second/equity lines include rent-back PITI payments?

 Yesterday, I was working on a terms class I'm teaching in a few weeks and stumbled across some interesting facts on seller's rent-back and buyer's PITI (principal, interest, taxes and insurance) payments.

In defining what a buyer's PITI payment is on the California Purchase Agreement contract, it doesn't clarify whether that payment includes a second, seller financing and/or an equity line!

In discussing (arguing really!) with my Broker hubby, the fact that it does NOT clarify what specifically the PITI payment is, therefore it includes ALL loans the buyer has on the property, right?

When I contacted my favorite escrow officer, she told me that 99.9% of the time the PITI payment is calculated based upon the 1^st loan only!

Here's another interesting question that has come up on transaction or two in the past for me. If the buyer obtains an interest only loan, is the seller still obligated to pay the principal on the loan? What if the loan is a neg-amortization loan?

If we look at the potential cost of rent-back for the seller and incorporate all these loans into the mix, that PITI payment could become astronomical!

So my hubby Steve and I discussed (OK, argued again!) how to protect the seller from signing a blank check for rent-back based upon the buyer's PITI payment.

We came up with this;

"Seller to rent-back property for 4 days after close at the buyer's minimum PITI payment." OR "Seller to rent-back property for 4 days after close at no less than buyer's full interest only or minimum neg. am. loan payment."

Still, we have the problem of buyer's possibly switching loans during the pending sale transaction, and then we're back to writing a blank check! 

Is the best way to negotiate a seller rent-back to simply put in a per diem dollar amount that the seller is willing to pay and "fa-get-about" the PITI payment?

How do you define PITI payments in your area?

What's with the Kinder, Gentler FHA Loan?

Am I missing something here?

 I work in an area that up till now rarely dealt with FHA loans due to the high home sales prices and low FHA loan caps.

 I just started working on a pending sale transaction where the buyer is going with an FHA loan. Horror of Horrors! My first thought was to load up extra heavy on the old Prozac until the transaction fell apart, then finish up with heavy drinking and deep resentment.

 But wait! Something has changed here since my last FHA transaction (about 7 years ago).

 When I called the loan officer and asked him if the seller still has to complete section 1 AND section 2 items on the termite report, he said "No, they don't require that anymore. Just whatever the buyers and sellers agree to."  EXCUSE ME?!!!

 Then I asked him if the appraisers still take forever to schedule the appraisal appointment, then do they perform a home inspection on the property and call safety issues that the seller has to fix (the appraiser would go out a second time to verify the repairs had  been made). He said, "No, they don't really do that anymore either."  HUUHHH?

 So I asked, "Well, what is it FHAis GOING to want from the seller? There's got to be something! An inspection of the attic, the seller's first born son, something!"  And he says, "Ummm, not really-FHA has loosened up their criteria so buyer's who get this kind of loan are just as attractive to a seller as a conventional loan buyer." WHAT THE....?

 So here's my worry (I guess I don't trust the government to make anything easy), NO ONE on this transaction has much experience with FHA loans. The loan officer has one FHA transaction under his belt in the last 6 months.

 I was trying to look up FHA loanson the Internet and I'm just not finding the snag... The "Yeah but...," or the "Oh we forgot to tell you..." information that is going to tank this transaction or at the very least, give me a migraine and more gray hair!

 Could it be true that this is going to be a hassle-free transaction?  So far the appraisal and termite have been completed and there are no unusual repair requests from FHA. The buyers are contracted to have loan approval in another week. Then we close in another 30 days.

 Is there anybody out there in Real Estate land who can share their recent FHA experience with me?

 I hate to be a pessimist, but I want to make sure I'm prepared for any potential ensuing disaster. In the meantime, I'll keep y'all updated on my FHA transaction experience!

Liability During a Pending Sale Transaction

When are agents most exposed to potential liability?

 Tomorrow I'm offering a free info webinar on transaction management courses I teach to real estate professionals.

 In thinking about the benefits of taking the classes it occurred to me that most disputes arising from clients and agents occurs during the pending sale transaction period.

 In discussing this with several associations of realtors, they agreed wholeheartedly with my assessment and added that most disputes were a result of lack of education on behalf of the agent.

 I know there is a lot of focus with new agents to teach them marketing skills to get the listing or buyer. Certainly this is an important stepping stone to developing a solid business plan.

 However, I believe that clear instructions should be given to the new agent on how to manage their pending sale transaction. There are so MANY tasks that must be coordinated, a lot of negotiation and working together as a team.

 In my 16 years experience as a coordinator and office manager, I have seen agents destroy perfectly good deals due to lack of knowledge with contractual law, the inability to create win-win negotiations, and work as a positive contributing team member.

 Transaction management is COMPLEX. Agents must understand not only what the role is of the other team members and provide them with the tools necessary to do a good job, but they must also know what part THEY play in the transaction.

 Contractual obligations such as contingency removals are so important because they can make or break a deal and put the buyers and seller in vulnerable positions.   

 Understanding the ramifications of removing a contingency is also important and protects not only the clients but the agent and broker as well.

 Finally, having some sort of system to keep the agent on track with the many tasks and contract timeframes is always good practice whether an agent is working on one or fifty transactions at once!  I use a computer software program to track my transactions and at least 100 tasks are assigned to an average pending sale file (Ok, Ok I'm a teeny bit obsessive compulsive!).  

What kind of training/tools have you received thus far in your real estate practice to help you successfully close pending sale transactions? Perhaps it's time for brokers to consider investing a little time and effort into this important aspect of real estate. Think of all the millions of dollars worth of deals that could be saved through reduced liability and successful closes!

The Mysterious Loan Contingency

This post is Part 2 of my Contingency Removal lesson and research I'm doing for my upcoming one hour webinar Understanding Contingency Removals

 I actually went through the California Association of Realtor's purchase agreement contract and could not find anything specific other than the buyer has "obtained a loan." But what does this mean? When has the buyer actually obtained a loan?

 First let's try and define a loan contingency removal. Most buyers and sellers agree that when the buyer has loan approval from a bank with acceptable terms, the buyer then removes the loan contingency. In essence, the buyer is making a commitment to move forward with the transaction.

 There is a clause in the CAR contract that allows a buyer to remove the loan contingency when the loan has FUNDED. Funding usually occurs on the day of or one business day prior to recording/closing.  Most sellers prefer to see the loan contingency sooner than this. They don't want the deal to be strung out for days on end waiting for loan approval only to find out the buyer could not qualify and selling time was wasted.

 So when does the buyer have loan approval? I've have many a loan officer tell me the loan is approved only to find out the approval was CONDITIONAL. Below are typical types of approval and risk factors;

 Pre-Approval-You will usually see this in a pre-approval letter for a borrower prior to a contract, home selected, appraisal report, etc. I'm going to be brutally honest here. In my opinion, sometimes a pre-approval from a loan officer is about as valuable as the paper it's written on. But that's another post I'll get to later.....

THIS IS NOT LOAN APPROVAL!

 Buyer's chances of obtaining loan approval-Apx. 50/50

Conditional Approval-Now we have a contract and house selected, perhaps an appraisal report has been completed and the bank has reviewed the loan application and supporting documentation and given conditional approval. THIS IS NOT LOAN APPROVAL!

 Buyer's chances of obtaining loan approval-Apx. 70/30

Approval with prior to doc conditions-Similar to conditional approval. The bank has approved the loan with conditions that must be met/approved prior to preparing the loan documents. These conditions could be minor such as a missing initial on a purchase agreement, OR they may be major such as 10 years of the buyer's tax returns meeting a certain annual gross salary figure. THIS IS NOT LOAN APPROVAL!

 Buyer's chances of obtaining loan approval-Apx. 70/30

Approval with funding conditions-Similar to conditional approval. The loan is approved with all prior to doc conditions met and a letter of commitment from the BANK who is giving the loan is prepared.

The loan docs are then prepared and delivered to title. The bank will submit prior to funding conditions that must be met prior to the bank wiring the loan money into the escrow account. They should be minor such as a clear termite certification, evidence of fire insurance, etc.  THIS MAY BE LOAN APPROVAL

Buyer's chance of closing escrow-Apx. 95/5 depending on what the funding conditions are.

Approved-The loan is approved with all prior to doc and funding conditions met Now we are getting closer. THIS IS LOAN APPROVAL!

Buyer's chances of loan docs going to title 98/2

Use the buyer's deposit (especially if it's incorporated as liquidated damages) and the above formulas to determine buyer's risk. If you remove the loan contingency too soon (approval with prior to doc conditions) there is an approximate 30% risk the buyer may not obtain loan approval and as a result may lose their deposit.

The least risky time to remove the loan contingency is when the loan has funded. HOWEVER, most sellers will not accept this. So as a compromise, the best time for the buyers to remove the loan contingency is when all prior to doc conditions have been removed.

HINT- SOMETIMES, a mortgage officer will MOVE a prior to doc condition to a prior to funding condition (very difficult to do, and requires a lot of begging and pleading from the mortgage officer to make this happen!).Before your buyer removes the loan contingency, ask the loan officer if he moved any of the prior to doc conditions to prior to funding conditions. Find out what the conditions are and DIALOGE with the lender and the buyer to determine risk.

Tell me, when do YOU submit a loan contingency removal-Hmmmm?

What Would Judge Judy Say?

I'm teaching a class in a couple of weeks on Contingency Removals. I would have to say one of my biggest challenges is to get the buyer's agents to properly remove a contingency!

I want to share with you who your contingency removal should measure up to.

That would be Judge Judy. Heaven forbid should you have to go to court because of a misunderstanding about the removal and Judge Judy shows up in the courtroom. YOU ARE TOAST-unless you have used the right verbiage!

Here is a list of some INCORRECT ways to remove an inspection contingency and Judge Judy's possible response to the buyer's agent;

"The agent has reviewed all reports and disclosures and removes the contingency"

Judge Judy's possible response: "Who the hell is this agent? Is he buying the house, did he sign the contract? What the hell is this ‘contingency' he's removing-is it a contingency that the agent can't purchase the home unless he drives me crazy first!!? Because that's what he's doing!!!!"

"The buyer has reviewed all reports and disclosures and removes the contingency"

Judge Judy's possible response: "WHAT CONTINGENCY?!!! Read my lips!!!! What the hell are you tawking about?!!!!"

The agent signs and removes the contingency on behalf of the buyer because the buyer is unavailable to sign

Judge Judy's possible response: "What, are you an idiot?!!! Are you in fact licensed? Do you have a NOTARIZED power of attorney in which your clients gave you permission to sign on behalf of them? Son, you have opened such a big can of worms-GAWD HELP YOU!!!!!"

"The buyer has read the home inspection report"

Judge Judy's possible response: "OIYYY              DON'T            CARE!!!!!!  Did they remove the inspection contingency with this statement? NO!! Look at me. Hey, LOOK AT ME!....Oiyy said NO!!!!"

"The buyer removes the home inspection report contingency"

Judge Judy's possible response: "What the hell is this????!!! What about the other reports and disclosures and inspections-Did the buyer decide not to remove those or WAS that the buyer's intention but you were too STUPID to properly prepare the contingency removal???!!!!!"

Ok, Ok, I could go on and on and on with the examples. But you see what a terrifying experience this could turn out to be if you have not properly prepared the contingency removal!

So (drum roll here), the correct way to remove a contingency in writing is to use the following language;

"The buyer(s) hereby remove the inspection contingency."  TA, DA!

See, according to MOST contracts, when the buyers remove the inspection contingency using this language they have in fact;

Completed all investigations

Approved all disclosures

Negotiated repairs, if applicable

Now, for other contingency removals, just replace the word "inspection" with whatever the other contingency is (ex. loan, appraisal, closing of another property, etc.)

So here's a question you should always ask yourself if the contract or addendum you just wrote is not 100% clear in its intent. "What would Judge Judy say?"

Sheesh, even better, TAKE THE CLASS!