Are You Getting Enough CE?

 The question I have for you today is: How much continued education do you seek between license renewals? In Washington, real estate licensees are only required to complete 30 hours of CE each licensing (60 to get the license and 60 more for your first renewal) and that renewal is every two years. That's really not much- 15hrs a year; 1:15/mo; 18min, 45sec a week; a little more than 2min, 36sec a day- but it explains a lot of the agents (not you, of course) that we meet in this industry and then never hear about again...

 The state only mandates that 3 hours of that be a specific curriculum of current issues in real estate- The remaining 27hrs are electives- Things like Paper-Clip Sorting, How to Arrange Seating in Your SUV for Brokers Open Caravans, and other stuff that, while cheap and satisfies the clock hour requirements, probably won't help you serve your clients any better. I even have mixed feelings on salesmanship classes that qualify for CE credits. The ability to sell an Igloo to an Eskimo may better your bottom line, but it doesn't alert you to contract law changes, new environmental regulations, and other factors that a lack of knowledge of could prove detrimental to your clients. Yes, a certain amount of what we do on a daily basis is coerce our clients into doing something that they will thank us for later, however is that enough to be able to claim "I took the required CE in the spirit the law mandates it for"?

 The reason that the law requires CE for real estate licensees is to insure that the public has a reasonable expectation of skill and diligence with the real estate community. Would you want to know that your doctor had opted to take "History of the Hypodermic Needle" instead of "Dangerous Drug Interactions" because they both offered the same clock hours and Hypo History was cheaper?

 So I ask, do you seek only to meet the Clock Hour requirements, or do you seek to become better at your profession? This isn't always an easy question to answer, however a little introspection can point you in the right direction. Do you stop going to clock hour classes when you reach your requirements? Do you wait till the last month before renewal to take any classes? Do you shop for courses based on price, or on relevance to your field of expertise or interest?

 Your wonderful personality may be what draws clients to you, however it will be the level of expertise that you have above and beyond that of the average licensee that, once shown to your client, will have them sending you referral after referral. Stay trained, stay sharp, and stay in business.

 Here's to your continued success!

Selling Property in a Shifted Market (A Sellers Checklist)

Western Washington's real estate market has changed. Big shock to those who are trying to sell, huh? OK, in all seriousness, it has shifted into a buyers market after 3 years of unprecedented appreciation for home owners. What can you do about it if you need to sell a property?

Well, start by hitting the right price out of the gate. For now, the days of listing a home at a price that has "Built in" appreciation are gone... You need to be at (or just below) the right price from day one, and no matter how you paint it, price reductions and long market times will cost you not only holding costs, it'll cut down the sales price as well. Think about it from a buyer standpoint- If the average time on the market is 72 days (and the average for Puget Sound Counties is), and you see a property that has been on the market for 120 days, what are you going to think..? "Let's MAKE A DEAL!" and you're going to lowball the heck out of the seller. As a seller, you're better off listing a little low and getting it then you are listing $5K over and ending up selling $15K under.

Next, STAGE THE HOME! Yes- Make it pretty so that buyers will fall in love with it. Reduce clutter in the yard; keep the lawn mowed and the trees clipped. Limit furniture in the house; take down pictures of your grandmother, knick-knacks, and other things that make the house YOUR HOME so that buyers can see it as THEIR HOME. If the house is priced right and looks purty, it won't matter that it's really a dog.

Offer incentives for buyers- Things like closing cost assistance, payment abatement, or home warranties. Even if the house is a dog that you just can't dress up, the small investment will pay for itself when the house sells, and this will help it sell. Another incentive would be seller financing or Lease to Purchase terms on the property. There are a lot of ways to make a deal attractive for a buyer.

If you're going at it yourself- Hire an agent. I know, I know... Kind of self serving coming from a Realtor, but the truth is when the market favors sellers, For Sale By Owners thrive. When the market favors buyers, FSBO's make less money trying to go it themselves, particularly after the costs of marketing and advertising it themselves. Also, serious buyers (and who wants to deal with any other kind?) only shop For Sale By Owner to save money- The same money the FSBO seller is trying to save by selling it on their own. And you can't both have it.

One of my secrets for selling is to write a reverse offer. These can be tricky (as there is a lot of legal considerations and ramifications to look at when you do these), and I mention it here as an example of the creativity that your agent needs to have to get the sale done these days. I won't go into any great detail here about reverse offers, as I don't want someone to proceed with one based off of what I said and get themselves into trouble.

Last, be willing to negotiate. I can't believe how many people are unwilling to negotiate $5K to make a sale happen because if they let go of it they'll only make $90,000 in 4 years of ownership instead of $95,000. That $5K will make LESS THAN A DOLLAR A DAY difference in your next home's mortgage. And yet there are those willing to lose the home they are buying because of a small amount of negotiations on the one they need to sell.

In the current Northwest market, it takes creativity and skill to sell a house. Make sure you either have it, or know where to get it.

Credit Repair- A Do-It-Yourself Guide

 This blog came about from an email with a friend- I felt that there are probably a lot of people out there who could benefit from this, so I edited out anything personal- If the flow seems broken because of it, I do apologize, I tried to fix it as best I could.

 There are a lot of ways you can improve the credit score you have, and most of them come down to paying off outstanding or long held debts, and responsible use of whatever revolving credit you may have (credit cards are an example of this kind of debt). Past due balances have the worst impact on your credit. As far as a home loan is concerned, things like vehicle payments and other scheduled debts will not be reflected as debts on your report IF you have less than 10 months remaining to paying them off. The history of payments you had with those will be considered as part of your record, however the debt owed will not be reflected as part of your debt to income ratio when you apply for a loan.

 Lenders look at (in addition to your credit score) how much money your household brings in, and how much debt you have to pay against with that income. There are not any lenders out there who will lend you an amount that would cause your monthly payments to be more than 45% of your monthly income (except perhaps hard money lenders, but those loans tend to be quite expensive in terms of interest), and only if your debt ratio does not exceed a certain percentage of what is left. What that percentage is will vary from lender to lender and loan program to loan program.

 There are still loans available for sub-prime borrowers, despite what the news says about the state of the mortgage industry. Sub-prime will mean a higher interest rate and a required amount of down payment, but again how much will depend on the loan program, your individual credit rating, and credit history.

 Some loans require the down payments to be your funds and others do not. Even most of the ones that require the money to come from you will accept down payment assistance grants as part of that, however it prevents you from asking the seller to help pay some of your costs.

 If buying a house hinges on your credit right now, my best advice to you would be to pay off any old debts you have. If they are small ones, just send a check and be done with them. Larger ones you may be able to dispute and either reduce, or if they are very old or have been sold from one collection agency to another a couple of times, you may even be able to get them dropped entirely. Really old ones I would not bother to contact- They may resolve themselves as "Uncollectable Debts" and go away (I wouldn't wait for all of them to "Go Away" if I were you, though), and contacting a creditor on a debt you haven't heard about in 6 1/2 years will only re-alert them to you and drive them to re-attempt to collect. I would advise that you avoid the "Credit Clean Up" and debt consolidation companies unless you've just got a HUGE amount to deal with, all they really do is charge you a bunch of money to do that which you can do yourself. It's not very comfortable to make the calls to your creditors, and that is the one advantage I see to those companies is that they make the calls for you, however almost every credit card company or debt collection agency will negotiate with you if you call and ask. They just want their money, and don't want to chase you down and send you a bunch of "Over-Due" mailers.

 If outstanding debt isn't the issue for you (I covered it first because it is for sooooo many people in America), and it's more a matter of not enough credit, your best action (and this should be part of your plan even if you are in a "Bad Debt" situation) is to either take a credit card that you have or go out and get a credit card and use it. However, when I say use it, I mean use it right. Don't buy stuff you can't afford with it, don't buy stuff just because you always wanted one... use it to buy the stuff you would buy with a debit card- Things that you would have bought anyway like gas or groceries. And then pay off the balance every month. With out failure. Keep a small open balance on the card, say $25/mo that the card company can collect interest on, but don't carry any more than that into the next month. This way, you'll establish a credit history without paying a lot of interest to get there. If you already have credit cards- DON'T DESTROY THEM!!! Even a long bad credit history is better than a short good credit history. Keep the oldest card you've got, treasure it and protect the account, even if it's the one you've got that has the highest interest rate. The longer your credit history, the more comfortable lenders are with the terms they are willing to give you.

 Certainly seek the advice of a loan officer or Mortgage Broker. The best of whom will help you put together the plan you need to get back on track, and can offer you advice on how to pursue the corrections and who to contact. This isn't a "Quick Fix"- Those don't exist- But for most people the overwhelming trouble they've found themselves in isn't as big as it looks, and a little down-n-dirty hard work can make all the difference in the world. You just have to start and act, rather than wait and react.

 And keep moving forward. Success is a journey, not a destination.

Change Is Constant

 In my last post I told a delightful story about John Q. Agent and Suzie D. Pro, and surviving change. And it occurred to me not everyone understands what I mean by sticking to a business model. When you know what you are spending VS. what you are earning, it is very easy to figure out what parts of your business need to change, and what parts you need to hold on to with an iron fist. But in order to do that, you need to have a business model.

 The easy solution is to steal one... Talk to a top producer in your office, find out what they spend their earnings on. Don't worry too much about the dollar amounts- if you are not at their level, you can't spend the same amount that they do. But that doesn't mean you can't duplicate what they do. Find out what they do that doesn't cost much or is free, and focus first on integrating that into your business (I should say here that if you try to squeeze in everything all at once, your head will probably pop). And look at the percentage breakdown of what they spend.

 I'll wager that in most cases you'll find that they are keeping three fifths to two thirds of each commission as "Take-home", and rolling the remainder back into making business (yes, Mr. Experienced Agent, you do it different... you keep more, spend more, whatever. But can what you do be duplicated by a newbie?).

 The lions share of that should be directed toward things that GENERATE LEADS. Without 'em, ya got nothin'. Budget out all of your available funds, and include savings for your overhead in lean months. What you budget exactly for each aspect of your business will depend on several things- for example, unless you've hired a assistant, you don't need to budget payroll. However, if you do direct mail, you may want to pad that budget with the funds you are not spending on payroll. Do you cold call? Make sure that you account for the phone bill at the end of the month. Each individual is going to have their own budget needs and categories.

 Once you've modeled out your budget, STICK TO IT. Don't overspend if you can avoid it. Now, there are going to be times where a piece of equipment or the set up on a new system is going to exceed the budget for that category for that month, but make sure it's a justified overage. The next step is to HOLD YOUR EXPENSES ACCOUNTABLE. Don't throw your money away on stuff that doesn't bring a return. What that "Stuff" is will depend on your market place to a degree, but if your new, you can't afford it yet.

 And finally, every business model is subject to change, and the rigid ones do not last. McDonald's provides food services around the globe, and you can count on the same quality in Seattle as you'll get in London. The prices and product are consistent and reliable (not necessarily good, but you can count on it being the same). I was in Leavenworth over the week end and found that in the tourist town the prices tended to be an average of $.30 higher than most any of the other McDonald's stores I've ever been to, because the market locally would bear it. Further, I'll bet McDonald's does not sell very many hamburgers in India, yet they have stores there. The business model changes depending on economic conditions and demand.

 If you don't hold your funds accountable, you will end up like John Q. Agent. A highly skilled, highly educated real estate fry cook.

 Here's to your continued success!

Market Value- The Impact for Sellers and Buyers

 As a component in an algebraic formula, Market Value is a constant- It is the highest price the market will bear for a property, regardless of condition, location, the seller's duress, mortgage amount due, average asking price for ‘Active' listings, or offers on the table. The dollar amount that is Market Value varies according to market conditions, property condition, location, etc, but Market Value is Market Value- It's simply the amount consumers are willing to pay for this product. If the home is listed at an aggregated Market Value and not selling, there is an additional condition to the property that lowers its value below the aggregated price and must be factored- Both by the seller and listing agent, and especially by the buyers agent, to protect the buyer. This could be a condition such as poor location (a home that is located next to a land fill is not worth the same as an identical home located on the top of a hill with a panoramic view of the countryside), poor or substandard condition (and condition is a factor in determining Market Value, so if that's the case, the price it's at is not that particular home's Market Value), or a need for a costly upgrade or repair (again, part of the determining factor in it's original Market Value, and the sort of thing we should be considering before writing an offer). The approach has been to look at Market Value as a number, and it simply doesn't apply. Market Value is a concept that can be quantified on an individual basis into a number, and what that number is will vary from person to person, property to property, and year to year.

 Home owners are looking at how much they need to make from the sale to pay off the mortgages, how much they'll be able to put forward on the new house, the vacation the profit will pay for, the Corvette they always wanted, whatever... but not from a business transaction standpoint. We did not watch little Suzie take her first steps in the living room, help Tommy bury Squiggles the Hamster in the flowerbed, or survive the financial hardships of starting and supporting our now grown families in the house. And while none of these things contribute to the dollar value of the property, all of them factor into the decision making process of someone who is emotionally attached to the sale. These things have to be considered when placing an offer on the house, and while we all want to buy for as cheap as we can get, offers that don't satisfy some level of need for the seller will not even get a response. It is much easier to negotiate when both sides come to the table.

 Buyers need to take this into account when placing an offer- What is the Market Value of he home. The goal is, of course, to get the home as inexpensively as possible. However the main goal is to get the home. An offer to purchase a $300,000 home at $200,000 is not likely to receive a counter offer, and certainly not likely to get accepted. So we try again, rewriting the offer for $250,000. Still too low, the seller ignores the offer. And while the Market Value for the home may be only $280,000, we've now upset the seller with our low-ball, time wasting offers. We'll be lucky to get an offer accepted at the full asking price, and you can forget about getting an accepted offer below asking price. This is not to say you should be willing to pay more than Market Value for the home, or that you should not try to get the home for less than Market Value, but we need to be realistic in the offers we make.

 Sellers need to understand that Market Value is not effected by what they want to get, The hamster burial grounds in the back yard, or anything else but Market Value. List your home within reason of Market Value- $50,000 high will not bring you very many offers unless your home is in the multi-million dollar category. As market conditions fluctuate, the quantified Market Value will change, up or down depending on conditions. Your real estate professional is there to assist you with determining Market Value, and you should heed the advice they give. In a growing market, you might be able to get away with pricing higher than Market Value (some), because the demand is there, and it might appraise by the time it's under contract. The reverse is true in a declining market- You'd better price a little below market, because it may not meet appraisal in a month and a half. Ultimately your goal is to sell the home as soon as possible for as much as you can get. An agent who would take your listing at a price higher than Market Value is not doing you any favors, and may actually hamper your sale. Longer market times are the reward for over pricing your property, and longer market times make you look desperate to sell. Now the offers you do receive are likely to be well below Market Value. You may even need to drop your asking price below market just to get an offer. This is also not to say you shouldn't try to get the most you can from your sale, just that we need to be realistic about how much is the most you can get.

 In the end, market conditions set what the value of the home is, regardless of what side of the sale you are on. Look to your real estate professional to know what the Market Value is, and plan your strategies accordingly. Set your price just above and place your offers just below, and create a win-win situation for you and the other guy. You'll find the process much easier and far less disappointing.

Proactive VS Reactive- Surviving Change

 Recent Surveys have shown that while many agents are suffering in the changing market, there are a huge number who are doing better business than ever before. What's the difference for those that succeed and those that fade away to the land of the formerly licensed? A firm grasp of the basics.

 We always want to find the "Magic Bullet"- A pill that causes weight loss regardless of how many McMeals we choke down; The secret formula that reveals what cards the dealer will toss out at the poker table before he even shuffles the deck; And my favorite, the no cost, no effort, infinite return lead generator for real estate agents (I'd like to have the patent on that). What studies and interviews with top producers has revealed, however, is that it's the basics of real estate that generates the returns.

 When the market shifts, it's the early adapters that thrive, and those who get a late start mearly survive. But its the cold calls, consistent mailers, and regular follow up that creates your market presence and establishes you as a lasting agent to the lead. Know what your market is doing and adjust accordingly. Taylor your efforts to the conditions you face, and hold the costs of those efforts accountable for the return.

 John Q. Agent has had it pretty good the last few years. He spends about 1/2 of his commissions on direct mail campaigns and gets a close from his farm every couple of weeks. The rest of his efforts are inexpensive, but uncomfortable, and so he only cold calls when he's got nothing better to do. He's never knocked on the doors in his farm, but that's OK, he's still doing alright. Between his farm, the occasional referral, and a few calls on his 800 number, he's made a fair living. About 6 weeks ago, the market shift really started to get noticeable. John's sales started coming further apart... 7 weeks, than 8, and right now Johns only got 1 listing and nothing in escrow. His own bills are coming due, and so, needing some income, John thinks to himself, "I need more leads. More leads turn to more clients, and more clients equal more closes."- A logical chain of thought. So John dumps his meager savings (he's been blowing a lot of money on a non-cost effective generator that has at least kept him going, remember?) into a new direct mail farm, adjacent to his current one, hoping for more returns. But the market has changed, and the audience of people who are buying and selling has dwindled to only those who need to buy or sell. Gone for a while are the days of people listing their home because they don't like the color of the carpet anymore. John still doesn't have the closes to keep up on his overhead, and so he takes the equity from his home to float his business... And that runs dry. While flipping through the newspaper, looking for a part time job, John comes across an open house ad for Suzie D. Pro, and it's in HIS FARM! He's heard of Suzie, she's from his office. She just got her license at the start of the market down turn, and in fact, he had made a comment to another agent friend of his the "She wont last". Curious about the home Suzie's holding open, John goes to his MLS and looks her up, only to find out that she's got 12 listings in his farm. HIS ORIGINAL FARM! Plus about a dozen more around the county into the other side of the county lines on all sides.

 What has Suzie D. Pro done that John Q. Agent hasn't? A lot of things. She's walked the farm. Knocked the doors and made the cold calls. Held every dollar she spends accountable for a return. Dumped the costly lead generation techniques that did not justify their own expense, and focused on the basics of real estate. John held on to a business model that was out dated and no longer relevant to his market. In this, Suzie had the advantage- She knew no other market and had not gotten the opportunity to grow lazy and complacent with her business, and as such will excel in the changed market and thrive the next time it swings the other way.

 The long and the short of it is that every market has it's opportunities, and it is the basics of this business that help us find them. If they didn't work, and work well, they wouldn't be the basics. There really is no such thing as a bad market. When the market is a strong sellers market, its pretty bad for buyers. A buyers market in turn is great for buyers and lousy for sellers. Examine your business model, hold your budget accountable, and any market will be a great one for you.

 Here's to your continued success!