Real Estate Book
Almost everyone thinks about going into real estate at some time in their life...but 80% of those who do take their license exam drop out after only six months! Obviously, the public perception of the business differs vastly from the reality. This book will give you a glimpse into the reality...and it is designed to take you from the day you decide to do it, until you have closed a few escrows.
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So You Want to be a Real Estate Agent
My Home Has a Yellow Bathroom
Real Estate schools teach applicants how to pass the state real estate examination – this book is designed to be read between the time you first think of real estate as a potential career and the day you close your fifth escrow.
There is a world of difference between the technical subjects taught in school and the real world of real estate – witness the fact that almost 80 percent of new California real estate agents drop out of real estate within the first six months. Obviously, the business did not mesh with the new agent's expectations. Perhaps this book will soften the blow of some of the real world situations and prepare you to laughingly say "It was just one of the sunken tub syndrome situations" instead of considering quitting. Real estate sales is a tough and demanding profession and a new agent should have realistic expectations. Specific instruction in the wording of sales and listing contracts is not provided because the wording depends on the specific contract your agency uses. Your broker will provide guidance on contracts. This book is designed to assist you for the first 180 days of you new profession – between the day you get your license and the time you have sold enough to be proficient.
Real Estate is more than a job…it is FUN. (Don’t tell everyone!) It can also be very profitable, but you must have the right attitude in order to make money. If you awaken each day with the attitude “I will solve every problem I face today,” you will make money. This is a business of problem solving…each Seller needs to sell a home, and each Buyer needs to buy a house. If you can solve those two problems, and all the minor problems that stand between the two people having their main problem solved, you can make SERIOUS money. If you can just get out of bed and solve problems, some big and some small, every day, without ever thinking about the money, the money will flow automatically. The real estate system is designed to reward problem solvers.
I hope you will find this book both enlightening and entertaining. It was originally written almost 30 years ago when I was just starting, because I knew that many years later I would not remember what I did not initially know. I have updated the book, but kept the information I developed 30 years ago intact. I was a Professor of Computer Science for 14 years, and I know that after a while it is common to assume that beginners know the terminology and at least some of the basics of computers – which is absolutely wrong. Similarly, I know that most real estate books assume you know things that you do not know. How could you?
I have updated the stories to reflect modern prices, only because I can’t imagine that you can relate to luxury custom homes costing $75,000.
Making money in real estate requires hard work and the efficient expenditure of time. If you think you are going to make a living selling to your bridge club or your golf partners – forget it!
You must compete with a lot of hard working, ambitious, and talented real estate people already in the field. They are not going to step aside just so you can get started. Real Estate is a zero sum game. If you want business, you have to take it away from someone else, and that someone is not going to let you take food off their plate without a fight.
You are going to have to match your competitors hour for hour, then, in addition, mine your bridge club or golf partners. Some people have a successful "gimmick," but forget that for a few months and concentrate on memorizing the multiple listings for your local area, distributing your business cards to everyone you know, seeing every house for sale in your area and taking all the floor time you can get. There may come a time when you are too busy to take floor time except when necessary, but that time is probably years away.
There are books and books on sales techniques, from knocking on doors (cold knocking), to intimidation techniques, to trying for expiring listings. Whatever is your style, remember that several other people are probably using it in your area and if any one particular style was really successful, then every sales person in the U. S. would be using it. You are going to have to select methods that suit your personality and that of the area in which you are working – then you must execute that method better than the sales agents already using that same technique. (If enough "cold knockers" are parading through your farm area to aggravate the neighbors, or if your area is one that wouldn't appreciate that technique, then pick another approach.)
In highly competitive areas, each of the sales techniques is in operation by someone all of the time. In this environment, the only difference will be who is willing to work harder, or smarter. If you are not prepared to compete, you should pick a less competitive profession. As in most professions, 20% of the people do 80% of the business. You want to be one of those 20%. You will not immediately start in the top 20%, but you can get there if you “plan your work and work your plan.”
You would be well served by writing a small business plan, because you are going to go into business for yourself. A business plan is sold to people as a means of providing a design for venture capitalists, but I have taught business plans at a university and I can tell you that the main advantage is in codifying your own thoughts.
A business plan requires that you sit down and place on paper your identification of:
· Your methods to differentiate yourself in the marketplace
· Your competitors – their numbers and skills
· The business climate of the community and of the real estate segment of that community
· Your financial investment needed to start the business
· Your expectations in developing income
· Your strengths and weaknesses
In the beginning, prepare yourself thoroughly by knowing, really knowing, the neighborhood you are working. If you don't know the inventory of all the homes for sale, the prices of all homes sold over the past six months, the zoning laws and local CC&Rs, and the local lending rates – then you are not prepared.
Get Prepared! Then you can list and sell professionally, not before. It takes a while to be able to associate model names with floor plans, square footage, lot sizes, replacement cost per square foot, and a thousand other major and minor statistics.
You have heard that real estate is the most lucrative hard work, and the least lucrative easy work around. This is a basic truth. There is so much competition that you must really work if you intend to be successful. If there was a successful gimmick to replace hard work then it would be useless because everyone would be using it. After you become well established and have repeat and referral business – three or four years – then you can slack off a little bit, to 65 hours a week!
Be prepared to out-study , outguess, and outwork your competition. So few people are really willing to work hard that you won't have much competition. It is the laziest people who drop out of real estate in the first few months when they recognize that it is hard, hard work.
You will have to manage your finances well in real estate. Your first check will probably be several months in coming, and there will be fits and spurts of money followed by drought. Jean and I have sold three homes and listed two in a 10 day period, followed by five weeks when we couldn’t buy a nibble. Real estate is highly cyclic, and no one can guess when the Buyers or Sellers will be abundant or scarce. It is fairly predictable that summer months will be better than winter months, but Buyers need to buy, and Sellers need to sell at any time of the year – and at any time of the day. Don't try to schedule your vacation in July!
Nothing is so chancy as money from a real estate transaction. As difficult as a transaction is to get into escrow, it is sometimes equally difficult to keep many of them in escrow.
You are going to lose some small percentage of sales even after escrow has opened. Some you will lose quickly, before you obligate the money you expect to gain – others you will lose the day before escrow is to close. Every one that falls out of escrow – early or late – for any reason – good or bad – is going to hurt. Some will be credit problems; some will be changes of mind; some will be personal, such as divorce or death, or layoffs and firings.
"Buyers Remorse," a constant sales problem, takes a great toll at this time. "Buyers Remorse" is a real estate term for the normal reaction most Buyers have the morning after they have bought a home. It can best be described as a "What have we done?" discussion punctuated with one or more of the following points:
1. We spent more than we said we could afford.
2. We are going to miss our old neighbors, and just think of all the work we have done on this house.
3. Our children will miss their friends and at their age that is important.
They just may drop out of escrow.
One of our biggest disappointments in our first year was just such an escrow fallout.
Jean and I were in a slump and had not made a sale in almost two months, and although some of our listings had been sold by other agents, we wondered what we were doing wrong.
Suddenly, out of the blue and into our office dropped THE QUALIFIED BUYER.
Driving an out-of-state, expensive, late-model car, he came.
Distilled, the conversation was:
"This is a really beautiful area. I'm going back to Minnesota in two days, having wintered over here in San Diego for the past three months. I need a home, and quickly – something around $650,000. Here is my checkbook – you will notice my checking account is over $800,000 – I can transfer more from savings accounts if I need it. Show us some homes."
I thought I'd died and gone to heaven.
Well, with only 48 hours to complete a transaction we started showing him homes. On Saturday evening he made an offer on a lovely $635,000 home, which, because of the amount he could deposit into escrow within a few days, and the fact he did not have to sell his home to purchase the new home, I secured for $626,000. The negotiations took four meetings and several hours of discussions. Finally, the deal was signed on Sunday afternoon and the Seller immediately purchased another home – literally within hours.
Nine A.M. the next morning, it fell out of escrow.
During our driving around the area my client had spotted a neighboring home that he was intrigued with. We told him that it was owned by a real estate agent who had just purchased it, but we expected it to come on the market in a couple of years. On his own that evening the client approached the owner and completed the deal as we opened escrow.
My Buyer had dealt in good faith, but he really liked the other home better than the one he had agreed to buy through me. He was willing to forfeit his substantial initial down payment ($15,000) to the Seller rather than have to buy his second choice home when the first choice was available.
Jean and I, and the listing agent, all signed over the entire forfeited amount to the Seller in payment for his inconvenience, so no real estate agent received a dime for the many hours of work. The only possible worse case would have been to have it fall out an hour before the close of escrow.
(We learned the hard way that if a potential Buyer remarks that he likes a certain home – go knock on the door. You may get both a listing and a sale commission!)
In a celebrated local case a "wealthy" woman breezed into town and "purchased" four lovely expensive homes in a single day. As a result, the Sellers promptly purchased replacement homes – whose Sellers probably did likewise.
Within a few days everything fell through. The "wealthy" woman was a flake whose rubberized checks and notes were bouncing off half a dozen banks.
Be prepared to lose a few transactions in escrow. We once lost four escrows in two weeks amounting to $1.5 million in sales price. That is unusual, but it can happen. Just hope it doesn't happen often.
The message: Don't obligate your commission money until escrow closes!
Salesmanship, and most books on the subject, are phony in today's sophisticated society. Most Buyers today are far too knowledgeable, much too informed, to be sold anything. Sales techniques may well work for some people, at some times, in some geographic areas; however, modern media has made the average Buyer so informed, and so skeptical, as to minimize the effectiveness of stereotypical sale techniques. The fast-talking snake oil salesman of the past is gone. Honest presentation of your product in a businesslike manner is the most successful sales technique. Give it to them straight – if the product is worth the asking price, it will sell. Not to everyone, but to the right one – and your job is to find the right one.
You are the only one who must be “sold” to your potential clients. There are excellent books on sales that will help you sell yourself to your client, because if the Buyer sees the perfect house he will buy – but not necessarily through you. The first and most important sales job is to convince the fresh potential Buyer or Seller that of all the sales agents in the area you are the best informed, most ethical, and easiest to work with. It is that “easiest to work with” that is crucial, because either a Buyer or Seller is going to see a LOT of their agent if the agent is any good.
The typical home Buyer today thinks he or she knows what they want (more on this later) and what they really need is not a "salesman" but rather a combination tour guide and order taker.
If you haven't sold yourself to them, they are free to choose someone else… and probably will.
There are times when the frustrations fall from your shoulders like a silk shawl. These are the times you live for, when you do some good deed that simply rewards you for years.
I was in the office late one afternoon, when a man came in. He was in his 30s, large build and short hair…my guess, Marine.
He said, I am not looking for a home quite yet, because I
am still in the military – I am a Dentist in the Navy – but someday I want to
live in Hidden Meadows. It will probably be several years.
We talked for a few minutes, and when it appeared he was ready to leave, I said, “On your way out, drive by this listing we just took in the office. It might strike you.”
I was looking for someone just like him for this home. The home was the first home in a neighborhood that had been developed into gracious million dollar homes…but this home was a simple A-Frame. It occupied a prime location with an ocean view, some 20 miles away! The home had been built as a weekend home by a couple many years before, and the home had become their home in their old age., but the stairs were too much for their 95 years.
The home needed someone with little money, but large potential for future income. A Navy Dentist coming up on retirement certainly filled that bill.
It took just 10 minutes for the Dentist to return. He burst in and said, “I have to see that home!”
We showed him and his wife the home, which, six year ago was listed at $265,000. That was more than the Dentist could afford, but he made a low offer…about as much as he could afford. Meanwhile, it was obvious that higher offers were being considered by the elderly couple.
The Dentist and his wife would park at night close to the home and simply admire the home in the moonlight as it towered over nearby luxury homes. One night the elderly couple saw them sitting down the street, recognized them from earlier tours of the home, and invited them in for coffee.
As the days went by, the elderly couple juggled offers much higher, but one day they came into the office and said, “How much can that young officer really afford?”
I said that $220,000 would extend them to their limit. The couple looked at each other, and the wife said, “Our price is $216,000.”
I was stunned, and the young Dentist was equally stunned…but he placed his home on the market immediately and put a new loan for the A-Frame into place.
The Buyers and Sellers became good friends during the transaction, with each making accommodations to keep matters moving.
After the escrow closed, the couples kept in close touch until the death of the older couple.
Today, the Dentist and his family live in the A-Frame, as he continues to deploy on ships. In the intervening six year they have made the plans necessary to improve the property to the standards of the neighborhood when he retires. He and his family talk constantly of their fortune in securing a home in a fine neighborhood for such a small cost, and one that he can extend within his future cash-flow without ever over-building his neighborhood.
An agent can get many years of satisfaction from being involved in something like this…a real win-win situation.
"All Buyers are liars and knaves" is the first thing an old real estate broker told me. It is a commonly-heard phrase in real estate. A little experience showed me that it wasn't true – but experience did show me that Buyers either don't know what they really want, or won't admit what they want.
One of our first prospects is a good example. She and her family lived only a block from us and she called my wife.
"Jean, George and I have had it. Our house is too big, an acre of ground is too much, there are not enough trees, and I want a pool. George has spent months remodeling and I hardly see him without a hammer in his hand. Find me a smaller house on a half acre with a pool and a small avocado grove," she asked.
In our small area, only one home met her specifications and over the next few weeks she must have visited that empty home fifteen times. She finally bought – but not the home we showed her. From another agent she bought a larger home than the one she owned, on more land. It had no pool, no grove – and it required a massive amount of work.
Liar? Knave? Certainly not! Just another Buyer who didn't really know, or admit, what she wanted to buy. Someone else showed her what she wanted to buy – either by luck or by design.
Within a week of this episode my wife was talking with another neighbor who had been looking for a small home in a neighboring subdivision.
"Sue," my wife said, "Have you seen the Capricorn model on Gusta Court?"
"Oh, yes," Sue replied, "and I didn't like it at all! The style just wasn't right."
Sue bought from another agent – a Capricorn model located a few blocks from the first one.
Liar? Knave? Certainly not! Just another example. My wife and I have learned to show prospects almost every home in the inventory that even vaguely resembles what the prospect says they want. Then we show them homes far removed from what they say they want.
When I was thinking of going into real estate sales, one of my friends told me "What I really hate about real estate agents is that when I want a three bedroom for $350,000, they show me five bedrooms for $420,000."
I know why!
Do you think Buyers buy homes based on number of bedrooms, baths and total cost?
It seems Buyers buy homes not to fit the size of their family, but to house their dining room set! Or for the sunken tub. No one ever said Buyers were smart, but they are the ones with the money and they get to set the rules.
People literally pay $20,000 to $35,000 more for a home that is large enough to have a separate dining room to house the $3,500 Drexel set they bought ten years ago. Of course such a home is characteristically 15 minutes more remote from work, so a place to house the dining room set costs many thousands more than the set is worth, and requires each worker in the family to spend an additional 30 minutes commuting each day. Common sense would dictate that the Buyer would be money and time ahead to make the piece into firewood, but in no case is this going to happen. I could understand it if the dining room set was a family antique dating back to the Mayflower, but that is usually not the case. Hemphill's Rule of Furniture: If it isn't at least three generations in the family, it is called "KINDLING!")
Then there are dogs. It is absolutely amazing how many homes are purchased for dogs. "I love the home but it doesn't have a big enough yard for Poopsie." Poopsie gets three votes on everything, while the Buyers get one vote each. My problem is that I have raised and shown Boxers, and I have never heard a dog vote on anything! I have never heard a dog declare that a yard is too small.
Sunken tubs are the sort of things that women don't tell their agent. They probably don't tell their husbands, and perhaps not even themselves. When the sensuous minded woman sees the sunken tub that meets her fantasies; then bedrooms, size, cost, view…nothing else matters.
Such sensuous-minded women come in all ages, all shapes, all income levels. The only thing they have in common is their inability, or unwillingness, to discuss their deep inner need for a sunken tub, or a bathroom garden, or a mirrored ceiling or something of the sort.
The sales agent is at a disadvantage in that there is no way of knowing in advance which Buyers suffer from the "sunken tub syndrome," or "dog syndrome" any other syndrome.
After the house has been shown, the syndrome becomes obvious.
There are many "turn-ons" for women, aside from sunken tubs. These "turn-ons" should be stressed – before you show the home, during the showing of the home, and after the showing of the home: fireplace, atriums, special appliances such as indoor charcoal grills, central vacuums, walk-in closets and convenience cabinets, and garage storage.
If you sell the wife, the husband will usually fall in line.
Recognizing that most Buyers really don't know what they want, be prepared to show them everything that fits their stated wants, plus an assortment of other homes. Don't get caught in the square footage constraint – show homes several hundred feet greater and smaller because design can make up for fewer square feet or diminish the usefulness of more square feet.
A home one foot wide and two thousand feet long has a legal description of two thousand square feet but you can't place a stick of furniture in that two thousand square foot home.
For heavens sake don't take your prospective Buyer from room to room saying "this is the living room, this is the hall..." They can see that! Do tell about the extras that are not immediately evident – the air conditioning, the sewer connection, the cable TV, dual pane windows, the easement for horses, the available membership in the community pool.
Try to condition your Buyers to the fact that there are only three items with which they must be satisfied: the land, the neighborhood and, to a lesser extent, the floor plan – and even the floor can be changed with enough money. It is a regrettable fact that most Buyers have a combination of a reluctance to spend money to fix up a home they have just bought and an inability to picture what changes can be made.
It is also a fact that sales are lost daily because a prospective Buyer did not like the color of a room – a color that could be changed in an hour at an expense of $14.95, both of which a sales agent would be happy to provide. Most people buy at the limit of their ability to pay, and have little left over for remodeling. Remodeling money can't be amortized over 30 years either, it is an out of pocket expense, so it is doubly difficult to rationalize.
The inexpensive changes, requiring only that the prospective Buyer have the ability to visualize a change of color, a change of drapes, a new light fixture, are frustrating to the sales agent.
Rationally, the most important item to the prospective Buyer is the land. If the Buyer is happy with the neighborhood and the lot, the rest can be changed. If you want a view and don't have one, then no amount of money will change that – so location is all important. The floor plan is the next most expensive to change, so it is next in importance. Finally, the color of a bathroom is of ZERO importance – but it will queer more transactions for you than you will ever finalize. Accept this fact with calm resignation. There are some things you cannot change.
Other than the usual legitimate Buyers there are some others you will meet:
The story is told that some years ago a local real estate agent went to the home of a local dowager and appraised her home at $90,000. The lady replied "Oh heavens, I only paid $255,000 and I could never ask more than $265,000!"
The real estate agent wrote her a check.
Everyone wants to do it – obviously not everyone can. For everyone that buys low, someone must sell low.
Most people are subjective Buyers, and even more subjective Sellers. It is the subjective Seller that causes most of the problem. They want to sell their home for $10,000 more than its true market value and buy the new home for $10,000 under the true market value. (Real estate agents amplify the problem by accepting the listing of the old home above the market value, and, in some cases, actually encourage this practice. See the chapter Ethics – Bidding for Listings).
Of course, with their home listed so far above the market, the Buyer is in no position to purchase a new home since his home is not a good candidate for sale. When everything eventually evens out the Buyer only gets offered the real market value of his home about $10,000 less than he expected, and the home he hopes to purchase will cost him market value – about $10,000 more than he expected. The market worked properly twice, but the subjective Seller feels victimized, and probably will blame the real estate agent.
The Subjective Seller is a study worthy of a whole book. Almost every homeowner thinks his home is the most desirable home on the block – that's why he lives there, and it has the style to suit his particular taste.
"The Barnyards down the street got $561,000 for their home and it’s not nearly as nice as ours. Ours had pink tile on the counters and a yellow bathroom. They only had a swimming pool, corrals, tennis courts and a gazebo."
A real estate agent hears this sort of subjective drivel every week as he seeks listings. Obviously, people who have yellow bathrooms instead of a tennis court prefer it that way, and value their choice higher.
The first listing my wife and I went to take was from a neighbor who we knew was going to be a problem because we knew him to be highly subjective. We appraised his home to be worth about $475,000, but knew the number he had in mind was probably a good deal higher. Since it was to be our first listing, we offered, before discussing price, to pay out of our own pockets for an outside appraiser to appraise the home and at least set the ball park for the listing price. I gave him a figure of $473,000. When I told the potential Seller he turned ashen and said,
"I was thinking more in terms of $595,000."
Well, we live in that area and have a civic reputation to protect, so we could ill afford to take a listing we could not honestly represent. I explained that we could list the property for no more than $495,000.
The potential Seller was adamant that he could get an agent to list his home at the $595,000 figure, but he might be willing to list at $550,000.
I told him that if he signed a listing with another agent for $550,000 to please remember me when the listing expired without having been sold, and the other agent asked him to re‑list below $500,000.
Subsequently, the home did not sell and the other agent asked the Seller to re-list below $500,000. The Seller listed with me for $495,000, after the home had sat without being shown during the peak selling period. We sold the home for $474,500.
At some time during the listing discussion a potential Seller must be told that he does not set the selling price – the market does. The higher the home is listed over its objective market value, the fewer agents will work the home, the less the traffic, and the less the chance of a sale.
It may be difficult to talk this way to a potential Seller, but it is a must. Listings must be taken no more than 10 percent above the market, and preferably 5 percent. It may be difficult because some real estate agents are the problem as they bid for listings – "Smith Realty says they can get $465,000 for your home? Why that's almost criminal! I can get you $500,000 if you just list with me."
That listing agent is part of the problem, not part of the solution. No agent has any more impact on the value of a home than does the desire of a Seller – each has zero impact. The market is the market and responds to its own circadian rhythm, not to the hopes of Realtors or the needs of Sellers. A house is worth what a willing Buyer is willing to pay for it, and not a dime more. The Buyer does not know, or care, what the Seller “needs to get out of the sale.”
Every agent has had a Seller say those magic words many times: “I need to get x from this sale because (I want to buy a more expensive home)(I want to start a new business)(My son needs an operation) etc.”
Buyers do not care!!!!! They know they can buy a similar home down the street or in another neighborhood for $X less – and that is what sets the price of a home.
Accuracy is most important when dealing in real estate. Rooms must be measured – don't use anyone's measurements, including the builder’s. If your listing copy says the bathroom wall is marble and it is a plastic imitation, then you must be prepared for a court of law to direct you to stand the cost of replacing the imitation with real. Real estate agents who have listed hardwood floors under carpeting only to find that the wood is plywood sub-flooring have had to install hardwood at their own expense. There is a difference between continuous cleaning ovens and self‑cleaning ovens. If you make a mistake, you will learn when you have to buy one for a client.
Several times I have had the opportunity to accept a listing another agent has lost, and in most cases I have found errors in the previous listing. In one case every room dimension was wrong.
BE ACCURATE. It will save you a LOT of money.
Some people enter real estate schools already knowing for whom they will work, but probably most will not. The rapid turnover of people in real estate, and the number of real estate people who change offices regularly, indicates some discussion of the subject is vital. No single subject can cause you as much frustration, or as much pleasure as the selection of an office. Offices are VERY DIFFICULT, because they can make your life a pleasure or a pain.
All offices look great on first inspection. The office manager is always a pussy-cat, the computers are all up to date, and the agents are all smiles. It isn’t true. Most office managers are tyrants when under pressure – this is a business, after all – and most agents are smiling because putting on a positive face is normal behavior for a salesperson.
Geographical differences aside, different areas have real differences because of the competitive situations in that area. In Southern California, where competition is fierce and the number of real estate agents is large, it is particularly important to be selective of your office. You can leave anytime you want, but continuous “shopping for an office” will give you a bad reputation, so try to get it right the first time.
No office can be all things to all people – but most offices offer something of value. Almost everyone wants a small intimate office that has a great volume of sales, cooperation between the sales force, harmony with the broker, a good training program, a great local corporate reputation, and a good percentage break of the sales and listings.
There ain't no such place! Once you accept that fact, you can prioritize your desires and add some less important but significant minor subjects – such as good computer equipment, training, floor time, availability of broker for advice, etc.
Let's look at the "mutually exclusives." If you have a small intimate office, it will probably not have a great volume of sales but it may have cooperation between the sales force. If there is a great volume of sales, the broker will expand the sales force to gain market share, which will dilute the amount sold per salesperson and increase the competition for the available sales, which will decrease the cooperation between the salespersons. Franchise offices have a big plus in nationwide referral service, but they pay a premium for that.
If you are patient and reasonably confident of your ability, then go with a small independent firm and be prepared for a low key, high quality sales career that will blossom slowly into good money and self esteem. There is usually no formalized training program, so you must depend upon the willingness of the Broker to help you. Promises made by Brokers while courting a new agent should be accorded as much value as a fraternity man’s vows to the date in the back seat of his car.
Bigness does not necessarily imply badness, but small firms can be more selective and can more carefully supervise their agents. That does not mean they will. Obviously, a big firm can, if it applies itself diligently, match or exceed the selectivity of supervision of a small firm that does not care.
If you are impatient, want instant money, are willing to accept high pressure tactics on your psyche, and are willing to transmit that high pressure to your clients, then join a large franchised sales organization. If it is a real high pressure office it is best for you to join one of these outside the area in which you reside, and for the sake of your reputation, tell your neighbors that you are a traveling salesman for a steel girder manufacturer. (Don't select a manufacturer of any product that your neighbors will want to see your samples. Steel girders work well.)
Interoffice competition and ethics are more important than almost any other single item. Don't think you can remain above petty rivalry, bickering and backbiting – you can't with total impunity. Your telephone messages will get "lost," drop-in customers will be told that you are "out of town" when you have gone shopping in a nearby suburb. No one actually lies, but the truth is awfully elastic in this business, and the rumor that many in our business are rejected used car salespersons is too near the truth.
One broker moved his office from a farther locale to an area closer to where he lives and sells. A prospective customer in conversation with a competing office was told, "Oh, haven't you heard? The Joneses have moved away from Farsville." The customer was left with the impression that the office had left the entire area, not moved closer. The Seller listed with the competitor, and only days later learned the truth. He was angry, but locked into a 90-day listing contract!
One way to judge an office is to inquire as to the length of time the individuals in the sales force have been with that one agency. Happy campers stay put.
Interpretation of that figure is less than fully scientific, but you should determine if the reason for the turnover is good or bad. It could be a change in the manager, a new quota of contracts or sales or any number of things. At least in Southern California, real estate agents are really independent agents and the successful ones can, and do, move for any reason. Or, I suppose, for no reason at all.
The successful real estate people I know have one thing in common and that is an innate competitive spirit, and a concomitant lack of loyalty to any particular agency. I think this is good. The sales agent is free to move from firm to firm as he or she sees opportunity or reacts to adverse conditions. The beginning sales agent must seriously study all aspects of the issue before determining what situation is best for them. No agency is all sweetness and light, but there are those that will either maximize your objectives or minimize your concerns.
The ethical standards of the real estate profession are probably little different from most other professions, and, like most other professions, the ethics are (generally) improving.
Ethics are the honesty of your dealings with other people, and have nothing to do with law, per se. The law requires you to tell the truth. Ethics requires the whole truth and nothing but the truth. Ethics requires that you divulge all of the knowledge you have on the subject even if it will kill your sale. It does not require you to substitute your judgment for that of your Buyer – if he wants a home next to a meat packing plant, it is not required that you try to dissuade him. Ethics do require that you point out to him that the plant next to his home is a meat packing plant and not just "an industrial site."
If you are not prepared to act ethically, in spite of the unethical practices perpetrated upon you, then you become part of the problem and not part of the solution. The real estate profession is working hard to upgrade the ethics and knowledge of the profession and it needs your assistance.
Real estate is a complex field requiring a knowledge of investments, sales, contracts, marketing, residential construction, zoning, public relations, law, taxes – and more. If you are prepared to become a professional then you will slide through your career in just a few months, never having known what real estate is all about.
The knowledgeable, sophisticated buying public must bear some of the responsibility for problems related to ethics and competence levels in the real estate industry.
Never, not once, has a Buyer come into my office and demanded of me, or of my sales forces, evidence that we know the first thing about real estate. The Buyers seem awed by the fact that each California real estate person has a "license" from the state. Even though I deal in California estates worth a king’s ransom, no one has ever said to me "Who are you and what makes you think that you are competent to sell me an estate. Give me a list of the last five people to whom you sold homes in this area, and after I have checked you out I may give you my business."
No, typically the Buyer comes in quietly and says, “I need a house. What have you got?" and they accept without question whomever is sitting in the office at that time. Certainly some leave pleasantly after some time and do not return to that salesperson but rather go to some other office – but I have never heard of anyone's qualifications being questioned up front.
You wouldn't go into a stock broker’s office and dump half a million on the first brokers desk without first determining whether that broker knew a put from a call. At least I don't think you would. But you and I have bought real estate from people about whom we knew, and, to this day, know nothing.
With the average California family moving about every 5 years, it is true that one of every third person you know is considering selling or buying.
But the question is – why should they list or buy through you? Everyone knows several people in real estate, so why choose you?
If you were going to enter into a $500,000 business transaction, and many residences cost that and more, would you go to your close friend who just got her license last week? Or would you select an acquaintance with whom you have never had time to socialize, but who has a reputation for knowledge of the business, hard work, business‑like procedures, and honesty? If you have half a brain, you will go to the proven professional rather than a friend – and so will your friends.
You can expect to prove yourself first with strangers who do not know of your inexperience.
No intelligent investor wants you to learn the business on them! If they ask, admit, but if you don’t act unprofessionally, they won't ask. Confidence is the key, and confidence comes with knowledge of the market and the people who populate your market area. If you get your license on one day and go to work the next, without immersing yourself in the available listings, recent sales, mortgage rates and local zoning laws, you will appear to be inexperienced. More importantly, you will be nervous because you will know that you are unprepared. Confidence is the end result of solid preparation.
To avoid confidence problems, start in a market that you are familiar with. In tennis the teaching pros say "Don't hit a shot you don't own." The same is true in real estate. If you are starting in real estate from a background as a middle-class housewife, then sell middle-class houses – not commercial investments or low rent apartments. If you are unfamiliar with or uncomfortable with rich people or with middle class people then don't try to start there. Select an area and a clientele with whom you are normally comfortable.
It is possible to make a general correlation between age and home condition and expected expenditures. Let's just take a look at my perspective and compare it to your own observations.
New homes in subdivisions all age gracefully, or deteriorate at approximately the same rate – so subdivisions tend to go up and down together. In some custom home areas, there are homes of many different ages and usually the older homes will try to stay modern so as to stay competitive with the newer homes.
0-6 YEARS: New homes require the most immediate cash and hard work, but give the most return on investment. New homes characteristically require drapes, possibly carpeting, and lots and lots of landscaping. New home developments have a lot of mud in the streets as new lawns are planted and tiny plants are dug into the ground. Since the plants mature in about five years, that is when the hard work and the maximum appreciation takes place. All the appliances still appear new and the carpeting looks very serviceable.
6-13 YEARS: The makeup of the neighborhood starts to change during this period, as families begin to sell. The neighborhood may be getting a bit seedy toward the end of this period – particularly if the neighborhood shows a character shift and if all the homes are the same age. Appliances are serviceable but probably not in keeping with newer styles.
14 - 20 YEARS: Major remodeling – or at least major redecorating – is probably necessary. Appliances not changed out before must now be done, along with some plumbing changes and perhaps structural changes as well. Roofs need to be watched, and windows need to be replaced. Landscaping is so mature and the neighborhood so stable that if these two items please you then the remodeling may be a worthwhile project.
The old saw about banks lending only to people who can prove they don’t need the money is absolutely true.
Some lenders are simply more accommodating than others. Some have a cardboard profile so rigid that a couple must fit it perfectly in order to get a loan…the man must be 35-47, stand 6’ tall, wear horn-rim glasses…
We had a very successful couple who wanted to own a gated home.
We found a magnificent home for sale for $850,000 and it just happened that the four homes the Buyer wanted to trade were worth the same $850,000 gross value.
No Problem, right?
The bank said that a couple making $200,00 could not afford the mortgage on an $850,000 home. We pointed out that for four years the couple had carried a total of four mortgages on homes whose value was $850,000 – and, in fact, after the transaction was completed the young couple would only have a payment of $4,000 a month on a home loan while because of a second trust deed, they had been paying $7,000 a month for years.
The lending institutions kept replying: "But their income times our normal multiple says they can only afford a $500,000 home.”
Finally, the deadlock was broken by the Seller, who was a very wealthy, retired developer and who, having had similar problems with lending institutions, carried enough paper to put the deal together. Then he leased the home back to himself until he could build a new home, and he is paying part of his monthly rent directly to the bank that has always held the mortgage so they didn't know yet that the home has been sold. They soon found out, when the entire transaction was refinanced, and they lost the income from a nice loan.
The most frustration that occurs to Realtors comes when things happen over which you have no control – and there are many things that are simply beyond your control.
Usually, everyone concerned in the transaction has an economic benefit in making certain that the transaction runs smoothly and quickly, but there are people who are less than profit driven and people who are preoccupied with their own problems, and institutions with their own circadian rhythm…and that rhythm is slow.
My own bete noire is financial institutions. They are either huge, with millions of customers and no interesting any particular one, or they are nameless and faceless and do not care if you ever do another transaction with them so they are immune to pressure.
Real estate people have a certain amount of control over escrow offices, and title companies, and even home inspectors. Realtors cannot control the inner workings and hidden mechanisms, or the opinions of any of these – but these people seem to be responsive to a call simply because Realtors can elect to use, or not use, their services.
Financial institutions are remote, answer only to the Buyer…and seldom do that. They could care less if the transaction closes on time – they know the Buyer is locked into the transaction with them once the Buyer has filled out tons of paperwork and is satisfied with the loan specifics. A day or two, or a week or two, one way or another is of no particular consequence to a lending institution.
The fact that there may be several homes involved in a domino effect, and there are many people with moving vans scheduled, will not sway them from their paperwork mill…which has not quite finished their appraisal/approval/funding process.
And there isn’t a damn thing you can do about it, except try to placate the people who have a job transfer to Europe and whose moving vans are in front of their home! They do not, cannot, and will not understand that some financial institution three homes removed from their transaction has not yet funded, so those people cannot close on their house so the Buyers of that house cannot close on another house, so their Sellers cannot be the Buyers for the people with the moving van in their driveway.
There is a special place in hell for lending institutions, but since most people select their own financial agent and it is some institution with which they have had a relationship for years, Realtors are out of the picture. We usually do not know the lenders involved, and we are usually brought in by a Buyer only at the last second when the loan is not funding on time…usually three or four days remaining before the scheduled closing.
Escrow offices, title reps, Realtors, home inspectors…they will all work nights and weekends to push a problem through the needle just to solve a problem.
Just try to get Megabank, Inc. to stay five minutes past scheduled closing, and see how successful you are!
You may have the option of selecting the escrow company and/or title insurance company. I say may because the other agent in your negotiation may make a demand on the subject, or your company may have an escrow company as part of its corporation.
In Southern California it is not uncommon for the listing agent to specify, usually in the listing, which company will be used. The listing may say, for example, "Escrow to be with the Brown Escrow Company." Rather than argue, the selling agent will usually go along. The reason a listing agent will specify is usually that Brown Escrow is part of the listing office company. However, BOTH escrow and title companies are negotiable, and if you are adamant – either as listing or selling agent – then you may be able to have your way.
All escrow and title companies are NOT created equal. They are not even close, and experience will show you which ones are great and which ones are lousy. Start with one that a friendly agent in your office recommends, or go with one of the big corporations until you get a feel.
Some escrow companies are prompt, exact, and react quickly to changes. Others don't return phone calls, do not have a complete package ready for signing, and take forever to amend escrow instructions.
Some title companies prepare property profiles for your potential listings and react quickly to your requests. Other title companies react slowly.
Your Broker may permit you wide latitude in your selection ‑ in which case you may find a good title company and stay with them, or spread the work around. My own preference is to stay with a good one, with an occasional trial of others just to test their reaction time and to keep your usual escrow or title company on their toes.
Any thought that a representative of an escrow or title company will throw business your way is misplaced confidence. And any business you give to one of the representatives because of a short skirt, a lunch, or a pack of candy mints per week is equally misplaced. (I am comfortable with companies that provide business benefits – weekly lists of mortgage rates, hand delivery of forms etc. – that's business. Anyone who helps your business deserves your business!)
My experience with escrow companies that have a corporate tie with real estate firms has been variable, ranging from terrible to barely unsatisfactory. They have a captive business and therefore are generally less responsive and more surly than those who must compete in the open market.
I realize that it is possible to be owned by one of the representative real estate companies and still be independent, but my experience is to the contrary. It is also my personal experience that, having a captive market, real estate subsidiary escrow companies are not as responsive as independent shops.
In a listing, the term "Stay with related services" is supposed to mean that the Seller of the home wishes you to escrow with an escrow company that is related to the Seller's real estate company.
Don' t do it!
Both Buyer and Seller pay the escrow fees equally and each side has as much right to name the escrow company as the other. Real estate firms that have subsidiary escrow companies require their agents to fight hard for the subsidiary escrow company, but I believe that in the interest of all parties a true independent escrow is desirable.
If you are representing the Buyer's offer in negotiation to abandon the independent escrow company you asked for in exchange for the Seller's representative abandoning the subsidiary company, then offer to let the Seller select any other company. Actually, the Seller usually doesn't give a damn one way or the other, he just takes the advice of his listing agent.
If you are going to work for a real estate company that requires the use of a subsidiary escrow company, you will have to square that with your conscience.
'"Listings are the life blood of Real Estate" the old saying goes, and I suppose it is the truth. There are a lot of agents who do nothing but list – it is easier, faster, and you can make money while you are on vacation if someone sells your listing for you.
Of course, SOMEONE must also sell, or the listing agent does not make money. Selling is harder, it takes longer, but you can take a sale to the bank – you directly control the paycheck. You can have 10 listings and have no money coming in – if someone else doesn't sell them for you. One sale by you and the money comes in – whether you sell your own or another person's listing. Real estate offices like listing better than sales because it gets the office logo into another public place and gives the impression of activity. The impression of activity generates actual activity.
The listing agent should be prepared prior to going over to someone's home to take a listing. Usually your first listing will come from an acquaintance, so it pays to be prepared. If your state assesses property based on market value, and if there is a fairly recent assessment then take this number into consideration. In California we have abandoned that basis for assessment and have gone to the last listed sale for evaluation, with a set % increase per year.
Then check recent sales for comparable homes in the area by checking the tables provided by your local Board of Realtors. Finally, from the same source, check and see what is currently being asked for comparable homes. Weigh these three numbers with the current cost of replacing the home, which you can determine by the current cost of raw land in the area plus the cost per square foot being asked by local contractors.
In most cases you will only have a couple of these numbers available so as you give weight to the information. Remember:
With these numbers in mind, notice the condition of the home as you enter. You are not only there to list the home, but to try to get the listing at a reasonable and salable price. Your first impressions are likely to be a prospective Buyers first impression.
Don’t fall in love with the home! Try to be dispassionate and realistic.
You must patiently explain that while your Seller is just wild for pink tile, black ceilings, orange drapes and cement floors, the market just isn't ready for it.
Try, really try, to get a reasonably-priced listing so that you can get the house sold. If you can, refuse to take any listing you can't honestly represent, but if the competitive pressure is too great, take the listing! You have already given the Seller your best advice, which will prepare him for low offers or no offers at all. As time goes on, you are on record with the reasonable price and perhaps you can get the Seller to lower the price. No listing is easy to sell. If it was easy to sell houses there would be no need for the real estate profession.
Your job, as an Agent, is to represent the listing AT THE LISTED PRICE. You are an agent of the Seller and if you can't honestly represent the price then don't list the home. Don’t take a listing so overpriced that you must apologize for the price. Don't start your real estate career by cheating your first client.
Quote the owners a reasonable figure, or a range of prices, and advise the owners of methods to best display their home for sale. Tell your Seller that you recommend an X price for a sale in 90 days, and Y if the home must be sold immediately. Ask them to quickly make needed repairs, paint, wash walls and windows, and get the lawn ready. Money expended will not necessarily be returned by a higher price, but it will make a distinct difference on how long it takes to sell any given home – or if it will sell at all. First impressions are lasting, so be very critical and point out in the nicest way those areas that need attention. Paint is cheap, and soap even cheaper. The bedroom door where young Johnny carved his name has been seen by the family for so long that they no longer really “see it,” but a prospective Buyer will.
A prospective Buyer will not think it nearly so cute as does the Seller. Get it fixed!
Most owners can use a list of recommended changes, so make one for them. Then keep after them to get it all done, for your mutual best interest. Don't be critical, and do be reasonable. You just want them to clean and paint, not remodel. Understand that it is still the Seller’s home, so don’t be overly critical – it is counterproductive.
Some owners will accept the figure you recommend for the sales price without question. Very few!
Some owners will exclaim that they could never ask that much for their home. (This category represents so few owners that it can safely be ignored, but if it happens to you, write them out an offer and take the investment for yourself.)
Most owners will be stunned (and perhaps peeved) with your low assessment of the value of their property. They know the Stubens next door got $456,000 for that home, and the Stubens house isn't as nice as theirs.
Of course, the truth may be that the Stubens said they received their asking price of $456,000, when what they really sold for was $423,000.
Remember that everyone thinks their home is the best on the block.
Buyers respond negatively to problems, whether obvious to the Buyer, disclosed by the Seller, or found by the home inspector, depending on the number, the complexity, or the expense. Each Buyer will respond differently, depending on their personal makeup, but there are some generalities that can be defined.
In general, younger Buyers are more willing to accept problems than are older Buyers, and each home is generally more a family home, or a retirement home, so the acceptability of problems is predictable.
Individual Buyers will accept different levels of problems, but they respond to number, complexity and expense. There is some number of even minor problems that can overwhelm a Buyer. There are some problems that are so complex that they are overwhelming even if the number is small – a needed kitchen remodel for example. There are some expenses that can be overwhelming even if there is no real complexity, for example, a new roof. Problems that are simply expense can be handled by a price accommodation or a rebate.
If the Seller has a large list of known or discovered small problems, it will reduce the ardor of a Buyer…and obviously a highly-complex need, or a very expensive need, can also be dampening, depending on the flexibility of the Buyer.
Safety items can be daunting to a Buyer, particularly a imminent fire hazard. These items are the only ones that I advise Buyers to get the Sellers to fix. The remainder of the problems either can be ignored if they are small or reflected in a lower price or a cash allotment for repair if the lender will permit it.
From the Sellers standpoint, Sellers need to find and reduce the number of potential problems before they list the property. A short list of problems gives a Buyer a greater sense of security about the property.
Large problems often exist in properties when the owners simply do not view the condition as a problem. This is particularly true when the owner is frugal in their opinion – their friends call them cheap behind their back. These owners are a problem when they become a Seller because they simply do not see their “problems” and want top dollar for their home. There is hardly an owner in this world who considers his home a “fixer.” When you point out the avocado green stove, an original from their purchase in 1963, they say proudly, “it still works!” Of course it does, as would an 1850 cast iron wood stove. It is usually the husband who is proud of the age of his appliances, but he usually drives a new car. Just a few months ago I was in a friend’s home where there were literally avocado green appliances, and a new Lexus in the garage…
If men were the cooks, kitchens would be much more modern.
Very few homes are sold without being cluttered up with contingencies or exceptions. Getting contingencies resolved will occupy a great deal of your time.
Most prospective Buyers have not sold their own home, and must purchase the new home contingent upon the sale of their home, or some other contingency that will give them time to sell their home – such as a 72 hour Right of First Refusal. Their home will probably be bought contingent upon the sale of their Buyer’s home. The chain can be endless. (One builder I know was so tired of contingent sales that he seriously considered putting a sign in front of his homes reading: PLEASE DO NOT EXAMINE THIS HOME IF YOUR HAVE NOT SOLD YOUR OWN!
If you should run across a Buyer who is staying in a motel because he has sold his home out of state and needs a new home, that Buyer is a bonafide, certified GOLD MINE. A Buyer who is so wealthy as to be able to purchase a home without worrying about the sale of his home is equally good, but even more rare.
One softer contingency is the 72 HOUR RIGHT OF FIRST REFUSAL (or 24 hour, or 10 days or whatever time limit is negotiated). This contingency permits the Seller to continue to market his home. If the Buyer’s home sells, then he must open escrow immediately. If a new offer is made on the Seller’s home, then the Buyer must open escrow within three working days or lose the new home to the second bidder.
The disadvantage of the 72 hour right from the Seller’s standpoint is that while the home can theoretically still be shown, many knowledgeable prospective Buyers will not inspect a home that is sold contingent on a 72 hour right. They reason, justifiably, that someone else has first rights to buy, and the second party may lose at the very end of the period. Since the 72 hour period is normally worded "Three working days" it is possible for the second interested party to have his backup offer accepted at noon Friday of one week and still have the primary Buyer open escrow the next Wednesday evening at 5 PM. The second interested party could then have an offer, and the emotional involvement, on a house for six days and still lose it.
The loss of that much time for the secondary Buyer, plus the emotional suspense for his family, diminishes the number of knowledgeable people who will even inspect a home that has been sold on a 72 hour right to about half those that would normally inspect the home.
This does not mean that as the listing agent you should not ever advise your Seller to accept a 72 hour right. Sometimes it is important to the Seller’s peace of mind to know that someone wants their home and is actively working on it. And if, in addition, you as the Seller’s listing agent can also get the listing on the Buyer's home you can ensure that his home is being actively marketed so that the contingency will be lifted at the earliest possible moment. That combination would be in the Seller's, the Buyer's, and your own best interest.
That's a hard combination to beat.
The world is filled with flakes, and I guess they have to have a place to live too. You will meet them, and you’ll meet them quickly, so I'll warn you.
The minor flakes are the ones who don't keep appointments, won't give you their names and phone numbers, get irate over minor problems, and refuse to get out of the car after you have made an appointment to show a house.
The major flakes are the men who make passes at female sales agents and vamps who show a lot of leg for male sales agents (and concomitantly, male and female sales agents who can't, or won't, keep their minds on business).
Clients who change their minds several times about almost everything, clients who expect older homes to be perfect, and clients who do not submit the papers to get their loans approved, their escrow instructions signed – anything that holds up an escrow from closing – are flakes.
Buyers who can't make up their minds, canceling escrows as their minds change, and Sellers who take their home on and off the market weekly as their moods change (this usually happens when part of the family wants to move and the other part doesn't) are flakes too. These are times when a no is better than a maybe for a salesperson. A maybe just wastes time better spent with real Buyers and Sellers.
Every week we deal with Buyers who expect homes built in the 70s to be perfect and reconstructed to more modern standards. There is no requirement that homes be updated to today’s standard. Most people have not done so except where safety has demonstrated such a need, and they are not going to rebuild the home just to meet your standards.
Oh, another peeve. Buyers who make an acceptable offer and then try to negotiate after getting a written acceptance. These Buyers are more prevalent than you might expect. They know that once a Seller is in escrow and has made all the financial and emotional changes necessary to move, they are vulnerable. That is when the Buyers may decide that if they make demands those demands will fall on accepting ears because the home has been off the market for a period of time and the Sellers don’t want the deal to fall through. Sometimes these demands are occasioned by the list submitted by the “home inspector” and sometimes the demands just come out of left field…which means that the demands were considered before the offer but delayed until a better time to negotiate.
In my experience, 60% of the people you deal with in the public are just so nice you want them as your neighbor. 30% are eccentric. Eccentrics do not bother me because I am eccentric. That leaves 10% who are crazy, mean or dumb. Most of these people are simultaneously crazy, mean or dumb.
Try to avoid these people like a plague. You don’t have to deal with these idiots. Many of these people have pleasant demeanors and can fool you until after you have entered a fiduciary relationship with them, after which time withdrawal is difficult.
Holding an open house in a vacant home in the middle of winter without heat or electricity is a real learning experience, so be prepared. If all of your open houses are in beautifully furnished homes, you are so lucky you probably don't need to read this book.
It is not necessary to buy yourself a lot of extra devices to stay comfortable between visitors – a simple collection of items you already own should do.
You will see days when NO ONE comes to your open house, and other days when you can hardly keep track of the people. It all depends on the price of the home (lots of people at lower priced homes), how close you are to the beaten path, and the weather. Cold, wet days reduce your traffic to those who really must buy – warm sunny days bring out the "lookers." (Many of those "lookers" are emotional Buyers if the home is "just right.")
If you have advertised a house "open" – then open it regardless of the weather, and take your lumps…
Once you are comfortable, prepare the house for an open house. Turn on all the lights and put on some soft music. The smell of freshly-baked bread can leave a real impression on prospective Buyers.
Start a fire in the fireplace if there is any excuse for doing so.
Now you and your prospective Buyers can both be comfortable.
There are few tools of the trade that you will need, but those needed are desperately needed.
You need a good four‑door sedan that is serviceable, fairly new, and kept clean. Personally, I don't believe that a new Mercedes is necessary, or even advisable. The automobile should match the neighborhood. A sales agent should appear successful without being ostentatious. Clothes should fit this same criteria.
More on both of these later.
A brief case is a desirable item, and it should contain the following items:
The best sales tool any sales agent can have along is their spouse. In Southern California the loss rate of new real estate agents is 80% in the first six months. Sell with your spouse, even if he/she can only sell part time. It will make you more effective because Buyers may relate better to certain people, and your spouse may remember those details which slip your mind.
More importantly, having your spouse along will keep either your career or your marriage from breaking up.
A man who is married to a real estate agent must have the patience of JOB, because just as he arrives home from the office, the phone will ring.
So get your spouse to get a real estate license and take them along on open houses and everything else that you can.
You won't be sorry.
Telephone! Before you show homes, phone and tell the owners you are coming and the approximate time you will arrive.
After you show the home, call again and diplomatically explain the reason your clients will not make an offer on the particular home. If the house was too small or too large for the potential Buyers then that is easy to explain. If the home is too dirty, or needs paint, or is too wild a design then explain that also – diplomatically. The Seller’s own broker has probably told them when he took the listing, but he can use the reinforcement from a third party.
If your clients are late or cancel, then telephone and make your apologies. (This will happen often enough to give you some free time to read, knit, or write books like this one.)
Aside from common courtesy, the telephone calls will keep your name before the selling public – and if the Sellers become dissatisfied with their listing agent, perhaps they will remember your courtesy.
Use the telephone! Your home telephone will become primarily a business phone. It is best to have several telephone lines. If you have long-winded teenagers, impress on them the necessity of keeping the phone clear for your calls. If you have not previously gained the upper hand in your house, get the kids their own phone. (You have no time to gain the upper hand if your haven't done it in the previous thirteen years.) Rule of thumb (if you can enforce it): not more than 10 minutes of personal calls each hour.
Your children must be instructed to pleasantly answer the phone, take messages when you are not in, and faithfully deliver the message to you. You cannot afford to miss any calls.
You are going to find yourself spending a lot of time doing NOTHING! The hours spent waiting at open houses for the next tire kicker, and in the office waiting for the phone to ring add up to horrible totals. Keep trying to generate business by calling those whose requirements you still cannot meet to let them know that they are not forgotten, call the listings you have to check to see if another agent has shown them, call the agent that showed the listing to see if there is any potential for a sale, call your friends to see if any of their friends have mentioned moving, call their friends if they have mentioned moving – try to generate some action.
Don’t work crossword puzzles, wax your car, talk to your lover, or write books on real estate. (Do as I say, not as I do!) Telephone someone about business. Constant contact shows people you are interested in working for them.
Waiting is the hardest part of this business. When you are waiting, you should be marketing. Write and rewrite ads, try to get a speaking gig before the local Rotary Club, plan a press release, design a website. Waiting is what I get paid for in real estate. I'd negotiate a sale for nothing – but I demand, and get, good money for waiting.
Real estate is such an unstructured profession that it attracts and fosters a large number of people who have no self-discipline. Since time is a product that is sometimes spent in large quantities without noticeable effect, it is pretty easy to rationalize a lot of office socializing and martini lunches.
Real estate is a people business, and it is natural that there will be a lot of socializing and interaction. It is important to remember that very little, if any, real estate is sold to another real estate agent, title company representative, or escrow officer. If you feel the need to socialize, do it with potential clients, not with fellow real estate agents, or related industries.
It is certainly easier to socialize with people in the industry: agents, title insurance agents, escrow agents, and the related industries. You know and like them. It just doesn't sell real estate. If selling real estate isn't why you are in this game then go ahead and socialize within the group.
Regardless, keep the booze to one drink at lunch. Business comes at strange times, and every Buyer and Seller deserves a clear-headed agent to handle a $250,000 plus transaction.
It is difficult to mix business and pleasure.
The final goal of both the selling agent and listing agent is to GET A SALE. You must ignore personal considerations and prejudices and represent your side to the best of your ability.
For some reason, most Agents get really nervous when they go to represent their Client at a negotiation. While this is natural, very few Agents have been shot for doing a bad job…although some deserve to be. Negotiations are mostly soft-edged discussions of positions. Hopefully, the party you are representing is making a good-faith offer that is not insulting, or you are not representing a grossly-overpriced listing.
If you are the sales agent in a negotiation, your job is to point out how fair the offer is (based on other recent sales), the minimum number of contingencies to upset the transaction (if that's the case), how the financial reputation (or amount placed down) is so good as to preclude the possibility of the transaction falling apart, and how a requested long or short escrow will benefit the Seller as well as the Buyer.
The listing agent and Seller will probably request a short conference, and, as you sit in another room or your car, they will discuss the offer. The listing agent will give advice on the reasonableness of the offer based on knowledge of the most recent sales and how active or slow the market has been recently. The Sellers, of course, know how much they are willing to move, and after the conference you can be expected to be called back in and told the offer has been accepted (occasionally), rejected (seldom) or that there will be a counter offer (often).
There is a move toward making offers by FAX or even e-mail, but I believe you best represent your Buyer in person, to argue the case for acceptance of the offer. By law, you are required to take whatever offer your Buyer makes, even if it is absolutely unreasonable. As I have said before, I try to avoid the kind of people who are unreasonable. I once had a person come into an office and tell me, “I don’t want to buy a home, I want to steal one.” Not with me he wouldn’t, so I called someone in the office who was in great need of money.
Once you accept a fiduciary relationship by writing an offer for a Buyer, it is difficult to rid oneself of the responsibility of representation. Walk early, if you think you may have to walk at all.
Hopefully, the offer you have taken to the conference with the Seller and the Seller’s Agent is at least somewhat reasonable. You need to be able to represent the Buyer’s interest.
Once the counter offer is written you must return to your prospective Buyers and see if they are willing to come up to the new price, or meet the other terms. This counter offer negotiating may work the first time or may require more trips than a legendary Henry Kissinger shuttle. No matter how exasperating the negotiating may be, you are in it for the duration. The fact is that the amount of commission you have to gain by selling for the new price will not cover the time and expense of another trip – too bad. You are in this for the duration and if the Seller’s cigar smoke or language is offensive, that is too bad. Your job is to represent your side in the most transparent manner – without coloring or impeding the transaction in any way because of any personal feelings.
In the end, should the principals be a few hundred dollars apart, be prepared to join the other negotiator in sharing your respective commissions so that the transaction can be finalized. First, of course, check with your respective brokers, but generally some money is better than no money and the commission may stand a little reduction.
If your position is that of the Listing Agent then after the presentation your job will be to advise your Seller as to the advisability of accepting the offer or the terms of a counter offer. The Seller knows how much they really want to realize from the sale, but you know best how the market has been acting and what the market will bear. You know how seldom offers are made and the advisability of continuing negotiations with a potential Buyer who has, uniquely among those who have seen the property, had sufficient emotional interest to enter negotiation.
The final decisions of both Buyer and Seller will rule, of course, but the experience of the advising and negotiating real estate agents is vital to keep the negotiation amicable and continuing. Keep negotiating on both sides.
Unless there is an agreement, NO ONE MAKES MONEY!
Just a note. I make it a policy never to know how much the person I am representing is willing to offer or take. Sometimes they just blurt it out before I can explain that my job is to represent the numbers I am given, and I don’t want my negotiation strength clouded by my knowledge that there is more room than the number I have been given.
Sometimes, the person I am representing will ask my opinion, and sometimes they won’t. If asked, I give the opinion straight.
One advantage to being blunt is that I am seldom misunderstood.
Your real estate office will handle most of the property advertising for your listing, although you may be required to participate financially, and it will handle the corporate advertising that pushes the corporate name.
You might consider personal advertising to push yourself.
If you are retired military, you might advertise in one of the many military journals or papers, nationally or locally. If you have been active in civic or local political affairs then buy space to notify those who know your name of the new association with real estate. If you believe that an ad, either of your name or your listings, can be targeted to any specific group and that the return on your advertising dollar will be profitable – do it.
Advertising is very expensive, but if you are careful to select the right medium, write a tight copy, and target your ad with precision, then you can make a profit. (GM, GE, and COLGATE thinks ads work, so who wants to argue.)
If your ad wording or ad placement does not draw fast results, then cancel it or change it. If your ad gets the wrong type of results, then rewrite the ad to a different clientele.
In addition to the usual advertising media of trade journals, local newspapers, the Internet and local throwaways, think exotic. Think of skywriting, billboards, radio spots.
Then think mundane. Think of ballpoint pens, calendars, potholders, desk pads, bowling score cards and bridge pads.
Somewhere in your mind there is a short news release for your local paper telling of your new association with the real estate firm – small papers will print it, virtually unedited.
Feed a bit of news about your area – good news – to your local gossip column and they will write "Louise Smith, a real estate agent in Pine Hills, says that… "
Get busy in local service clubs, support local civic activities, become visible at community affairs. You are in a public business that requires public support, so become visible. The appearance of civic concern is not your object. Become honestly involved, not because of your real estate business, but to better your community. Business will follow in time, but even if it doesn’t you will feel better for doing it.
If you are articulate – or can become so by going to a group like Toastmasters or Toastmistresses, become a speaker before local civic groups. Your subject – the Care and Feeding of Roses, or either side of the upcoming bond issue – is not as important as getting your name before the public.
Make your involvement with the Garden Club, Little League, or Kiwanis an active rather than a passive role. If given the choice of a visible role or a backstage role, be visible – serve the pancakes at the local "Kiwanis Pancake Breakfast" instead of washing the dishes.
Having published more than 1,000 controversial columns in local newspapers over many years, I now additionally publish several e-mail newsletters. One of the newsletters is pure weekly commentary on controversial subjects. The other newsletter I e-mail publish is about the local news in my small community that has only a monthly newspaper. I can take a digital photo of a newsworthy event and send out my two or four page newsletter within an hour of the event. That means my neighbors get real NEWS – the monthly newspaper provides history.
When I started writing for the local paper, my Broker asked if I did not think the writing would be too controversial and wreck my real estate career. I told him. “If 50% of the people hate me and 50% love me, and if I get the business of the 10% of the 50% who love me I’ll be wealthy. If I write, which is a skill I have, at least 100% will know me.” The worst thing in real estate is to be unknown, so get known in whatever manner is suited to your personality and your skill.
You won't have to wear a sandwich board that says "Acme Real Estate." If you are visible, enough people will know who you are and for whom you work.
As this is written, I am the Chairman of the Technology Committee of my Real Estate Board. I have been a professional in computers for more than 32 years and have just completed 14 years as Core Adjunct Professor of Computer Science at National University – with more than 6,000 classroom teaching hours. Obviously, I think the Internet is the real thing. If you think it is just a fad then you don’t belong in real estate.
My website, www.allenhemphill.com was selected as one of the top five in the State of California and one of the best 100 in the nation on just one thing – content. That means I answer every question that either a Buyer or a Seller can possibly want answered on that website – and I update it often, even daily.
That is why I recommend that you do your own website. Yes, I know you don’t know how to design a website. You can learn, and you should just so you can keep your site updated. If you rely on someone else you will be bled dry by people who are doing something you can just as easily do.
The answer is Microsoft FrontPage. It is NOT an easy program to learn, but you can go to schools and learn enough in a day to do your own work. No, you will not be the best website designer in the Western World, but you can do it.
I won’t spend much time on this, but you can go to my website and see what I think a website should be. You should not try to copy it, but you can get a general concept and then do it your way.
Some years ago, I was undergoing SCUBA training in Hawaii. The instructor from Underwater Demolition Team II continually harassed the novice divers as they trained in the pool. He would swim up behind the novice and flip him over on his head. Before the novice could recover, the instructor would rip the face mask off his victim, then rip off one of the victim's swim fins, displace his mouth regulator, and turn off the aims from the tanks. Several victims had to be hauled to the surface before they died, and they were immediately failed out of the course. After several days of this harassment, the instructor explained.
"Those of you who survived did so by getting your priorities correct. Each one of you ignored the damn swim fin and the fact that your face mask was full of water and your eyes were burning. You got the regulator back in your mouth and got air back into your lungs. Then you cleared your face mask and searched for your missing swim fin. No matter which way I flipped you or what I disrupted in which order you determined that your top priority was to breathe – then you messed around at your leisure and got organized. Those who almost drowned did not. If the first attack flooded their mask and unbuckled their weight belt before I interrupted their air, then they tried to clear their mask and grab their weight belt before they got their air back. Some people are programmed to react sequentially without establishing proper priorities. Those people die too easily underwater and we don't need them."
Get your priorities straight! Solve the problems that need solving first, first.
There are many potential time wasters available for you. Friends will ask you to show them houses just because you have access to those houses, when you know there is no chance in hell they will buy. I don’t say never show your friends houses, but make certain you do it on your time and AFTER you have solved all the outstanding problems.
Make it a point to solve today those problems you find today.
If someone asks you to find them a shopping center, you have a lot of learning to do. If a neighbor wants you to look for some land for him in a rural area 50 miles away, you have a lot of studying to do. The local real estate agents intuitively know where the new freeways and shopping centers are being planned. They know the school bus problem, the local restrictions. You have a lot of research to do.
If you have the time – do the favor. If you don't, don't do your friend a disfavor by doing less than a professional job!
That's a lesson everyone should learn under less hazardous conditions. If you have a neighbor who is an inveterate tire kicker and who may well sell and buy another "if I can find the right house" – and an out-of-town Buyer who is sitting in a motel with his family and whose home just closed escrow in Beverly Hills – can you guess who has the priority?
Well, your days are going to be filled with decisions a lot closer to call than that rather obvious example. You may have a signed escrow instruction to get to an escrow office, an accepted offer to get back to a Buyer, a trip to the hairdresser, and a hot Buyer in town. You may also need to shop for another car, do some grocery shopping and see a friend. (Circumstances vary, but get the accepted offer back to the Buyer. A contract in California is not locked in until that happens.)
Basically, your top priority is to make a living in a highly competitive business, so do those things first which will make, save, or salvage from loss that ingredient you most desperately need – MONEY. You provide a needed service and you deserve to be paid well for your service. Money is the SCUBA tank air. Without some of it to keep you alive you can't provide any service to the Buyers or Sellers, so do those things first that are time critical to making money.
While on the subject of time control ‑ one of the great time stealers is doing listings and sales favors out of your area for your friends. Working out of your geographical area of interest or your professional area of interest is very time consuming if you are in a residential sales market and are asked to list somewhere you can’t serve properly.
Even in residential sales there are HUGE time wasters. I have often considered putting a sign above my desk which reads: ”Please go out to the car and decide among yourselves what you are REALLY looking for.”
If the husband and wife want two different things, you are in trouble because there are no one-story, two-story houses. There are no formal, informal homes. There are no homes on small, five-acre parcels. You are going to get in the middle of a family argument, and that is not an argument you can win.
Give it and you will get it.
You are going to need it.
You will get requests from lost drivers and unknown appraisers who want comparables for recent local home sales, and you will haul invalids, pet sit, water lawns, deliver groceries, forward mail, draw sketches of floor plans and sprinkler systems – the list is endless.
You will need the cooperation of people in lending institutions, escrow companies, title companies, competing real estate offices and out-of-area real estate offices at one time or another.
Institutions are big, cumbersome, and impersonal. In each institution find a person who can cut the red tape and be personable – there are many in the most bloated bureaucracy – and they can expedite the way. Don't curse the system, find a way to beat it.
If you are pleasant and cooperative with others, your reputation will spread and others will be pleasant and cooperative with you. Make no mistake – you will have a reputation shortly in the real estate business, and you want a good one. If you are given to periods of negativism or depression, then this is not the business for you – or if you have occasional fits of the blues and must take that time off. You cannot afford to be negative or depressed in a positive and happy business.
Both Sellers and Buyers are usually happy with their impending move, or at least they put the best face on their move. They don't need some long-faced sourball who only has aches, is on a bad sales streak, and hates the weather.
A seldom-mentioned, but very real, danger for real estate people is the threat of physical danger.
Residential real estate attracts to its ranks many attractive women of all ages, who are often called upon to meet unknown clients in out of the way locations – sometimes even vacant homes or industrial plants. Strongman holdups and even murder make men almost as vulnerable as women.
Violence in our society is pervasive enough without the usual risks inherent in real estate sales. You can diminish those risks by taking some common-sense precautions. Never arrange to meet a stranger at a site off the beaten track. Always meet the client at a public place and "prequalify" him. Always take someone else with you if possible – a male spouse or another sales representative.
Keep your office, or your home if the office is closed, constantly aware of your movements and with whom you are operating.
Real estate is a real equal opportunity employer. Many women are engaged in the profession. No female in today's society would think of meeting a strange man at an isolated site at night. Neither should a female real estate agent. (This is another good reason to have your male spouse licensed as an agent, or at least available for company.)
Male real estate agents are almost as vulnerable – they drive nice cars, carry credit cards and usually some cash. Many wear nice jewelry. To a man with a knife or a gun, a man without a gun is as vulnerable as a women without a gun.
Take simple precautions. Don't be afraid of your own shadow, and don't be afraid to sell property, but do be safe. Today's world is unsafe at any speed, so take common sense precautions and don't expose yourself to danger. Reschedule for a time that is more safe for YOU!
Someone – no great sage in my opinion – remarked that sex is 10% ability and 90% availability.
It is not true about real estate either!
But it certainly appears to be the case in many circumstances. Buyers and Sellers both want you to be available when they want you – and they want you NOW. A phone that doesn't answer just won't hack it. If you are operating out your home, get an automatic telephone answering device. It is easy to have a home phone forwarded to your cell phone, and that makes you completely accessible to your clients.
If you work primarily from an office, keep the office informed as to your whereabouts. Then check in regularly, and call back immediately.
Real estate is an immersion business and you must be available almost every second.
Real estate is, if you are doing it right, a total immersion business. You are going to eat, drink, and sleep real estate. The conversation at cocktail parties is largely real estate.
"How much did the Sterlings get for their home?"
"Is the Murphy home for sale?"
“How much is my house worth now?"
It's as bad as being a doctor.
You must get away from the pervasive subject of real estate! And that won't be easy. Weekends are your best selling time, so you cannot easily get away on weekends, but clients know that escrow companies and lenders are available during the week so the clients want you available during the week. Summers are your most lucrative time, so that is difficult. And, of course, you are always going to have a couple of escrows working, so long vacations at any time are difficult.
Still, you must take time out or you will become so supersaturated with real estate that you cannot properly function.
After Labor Day and before Spring, during the normal work week, pick a nice secluded mountain retreat or beach condo that is away from your usual haunts, and get there for four or five days at a time – at least four times a year.
You are going to need the seclusion, and you will need at least two days to "wind down" and another two days to rest. It is not uncommon to hear people returning from vacation mention the fact that they had a dream about the Murphy listing or waking up as they were trying to beat another agent from another office to a new listing.
(These remarks are written in a secluded mountain cabin during a four day retreat. As the manager of a real estate office, I felt obligated to leave the phone number of an inn near the cabin in case of a real emergency came up. We had a whole three hours in the cabin before the first office call came!)
If you can, don't leave a phone number!
Better yet, take a short ocean cruise.
In my later life, as I get ready to place this on my website, my wife and I take several two-month vacations to Kauai each year. I set up a complete virtual office on Kauai thanks to modern computers. I can do almost everything from Kauai I can do at home, except sit an open house and run papers to escrow.
Fortunately, there are people who will do these things for a fee. I prefer to do them myself, but if that is not possible, it can be handled.
I have developed two speeds – Sales and Marketing. I sell when I can, and market when I can’t sell. The substantial website on which you find this booklet was developed on Kauai. This manuscript, and most of the other content of this site, was written or rewritten in Kauai.
Further, I spend four months a year on Kauai virtually free. For information on how to do this yourself, please click here: www.allenhemphill.com/newpage22
Once you pass the state exam, you are a real estate agent. Period!
If you apply for and are accepted by the local Board of Realtors, and thereby agree to abide by their stringent code of ethics, you may use their copyrighted title "Realtor-Associate."
If you then study for and pass the real estate brokers exam, you are a real estate broker.
If you then apply again to your local Board of Realtors for membership as a broker, then you may use their copyrighted designation – REALTOR.
Membership in a Board of Realtors does not in itself make you any more pure than does membership in any other voluntary association, but local boards do have internal sanctions for professional conduct that try to keep the profession honest.
I believe that joining in such "voluntary" association for the improvement of the profession is very wise because it permits us to at least attempt to clean up our own house. Admittedly, we don’t do a very good job.
That is a lot better than turning over the policing of our profession to those wonderful people who brought us the U. S. Postal Service and Amtrak!
After a few years in the business you may decide to participate within the Board in a more direct manner than just joining and attending some selected professional lectures. Until you have built your local professional reputation and repeat business you would do better to spend your time building your social contact with non‑real estate people.
The business of business is business
Once the listing is inked, you have an obligation to get the home presentable for sale. In some cases – many cases – you must find a diplomatic way to say "Please clean up this pigpen.”
As a retired naval officer, my military mind tells me that the best way to get the job done is to write your comments on a 3 X 5 card in red magic marker and attach the cards to items and walls by the use of double‑stick tape.
Jean disagrees, and, as usual, she is right. My method is probably best but might lead to an unhealthy and unwanted hostility. Jean’s method is more politic, and probably almost as useful: simply go from room to room and make advisory remarks. Make your critical suggestions in an uncritical manner.
We actually take our own cleaning material to some houses the first time or two that we sit an open house. On one home that we both listed and sold, we spent more than twenty hours washing down walls and cleaning. Sometimes "above and beyond" is necessary. We want to put our best foot forward and our listings are our "best foot." The home we have listed has our name on the sign rider, so when our name is on the house our reputation is on the house.
We have cut lawns, screened doors, washed baseboards, and arranged to have doors re-hung.
Dirt, clutter, and repairs – that's the order to attack the problems.
One thorough cleaning, including washing all windows inside and out, is usually enough to last until the home sells – but it must be thorough. It may be necessary to clean the carpets – and certainly a thorough cleaning of the stove is required.
The clutter problem is something that will take constant attention. Initially, the Seller should be encouraged to store extra furniture in a friend's garage. Too much furniture makes a home appear smaller than it is. Then the constant picking up of children's clothes and toys must begin. A salable home must appear saleable at all times.
Finally, repairs. Paint and screens provide the most noticeable effect for the least expenditure of time and money.
The three most important areas to concentrate your efforts, or those of your Seller, in order of importance are:
Probably one of the nicest things about real estate is that it is virtually unregulated. Sellers and Buyers set the prices of homes – not some federal bureaucracy. Likewise, the commission rate is set by each office in a competitive manner. Even further, your cut of the office commission is negotiable and competitive.
No union controls working hours, and no government controls wages or prices. Almost everything in this business is set in the marketplace and the benefits of this free market situation accrue to all concerned.
I feel certain that governments have investigated the possibility of regulating the industry, but they probably concluded that attempting to set sales prices of people's homes might be an intrusion that people are not yet ready to accept.
If agents ever lose their independent contractor status, then it is the beginning of the end to the unregulated industry – and the IRS is looking very hard at the independent contractor situation.
The history of regulation is that initially it begins as a labor-management fight. If our industry ever forms into a labor-management situation, we can expect the same.
Usually labor gets a law passed which limits the power of management to operate, then management retaliates by supporting legislation which hampers labor.
As a result, you have both labor and management weaker than they were, while government has
two laws to enforce. Labor or management starts the war again, and both end up weaker while the government has more laws to enforce and thereby grows stronger.
As a consequence of this pattern for the past thirty years or more, government already has many commissions and programs ideally suited to regulate our business.
As other industries fight to throw off the stifling yoke of regulation, the regulators themselves – rather than go out of business – would love to have a new industry to regulate.
Let's not give them ours!
Your car is such an important item in real estate that in addition to its mention in other sections of this book, it deserves a separate section.
Your car is your actual real estate office so it must be clean, comfortable, and functional. It should look as if you are successful, but not rich.
Ideally, it should be a late-model four-door sedan, van or SUV fitting for the clientele you will be transporting. (One real estate agency I knew required that the sedans of their agents be no older than two years, which would not permit the five year old Mercedes Benz with which I started. Obviously, didactic rules which require newness without taking into account quality, miss the point, in my opinion.)
As an independent contractor, at least as of this writing, your purchase of an auto is a big tax deduction as an income tax credit. From a purely economic standpoint, it is advantageous to purchase a two-year-old vehicle which still retains the initial glow of good looks (if well cared for) and requires minimal repair expense.
Economy of operation is a must, and must be considered in making the purchase. You are going to put a lot of miles on the car. Check the “Frequency of Repair” records in Consumers Report magazine an heed their content.
Do not be so far out of character in the selection of an automobile as to be significantly above the norm of the automobiles in the area you serve. Don't take your clients mind off real estate by using a car that causes them to concentrate more on your great, or lousy, car than on their prospective home.
But if all you have is a camper van, or a two door sedan, and you are just starting to work – don't worry too much about it. Clients are going to buy the home of their dreams if you show it to them at a reasonable price, even if you have body odor, bad breath, wear overalls, and drive an old two-door sedan.
(If you ever get the chance to show them their dream home under those conditions.)
You can increase your chances of showing the client the home of their dreams by bathing, brushing, dressing, and purchasing the right automobile.
One other thing: if you have a real estate sign on your car, remember that your driving habits, good or bad, will make you friends or lose them. The woman you cut off at the corner – the man you almost ran over in the pedestrian crosswalk – they will remember, and they will talk.
One of the things that is most difficult for most real estate people is to take a few hours off to get normal maintenance done on your automobile. It is difficult to schedule the usual oil changes, lubrication, replacement of radiator hoses and belts, tire rotation, car washes and polishes.
If you have an appointment downtown or anywhere near a reputable filling station, make a simultaneous appointment nearby to get the work done while you meet a client for lunch, see your doctor, or attend a seminar. You may save some parking fees, you may get some much needed walking exercise, you may save some time, and you may save a very expensive automobile repair by getting normal maintenance done at regular intervals.
Years ago I visited the Rolls Royce factory in England. I was impressed by the fact that their engines, while built with good ENGINEERING practices, had no secret or special engineering factors. I became convinced that if a Ford owner treated HIS Ford the way a Rolls owner treated his Rolls then a Ford would last at least 90% as long as a Rolls.
Rolls owners treat their fine machines as an investment as well as transportation. Ford owners probably spend a higher proportion of their discretionary income on their cars than Rolls owners do, but for some reason don't think of Fords as investments. A real estate agent must have a clean and smooth running car, and it certainly is an investment.
Give it regular maintenance while you do other things.
Once upon a time, there was a couple who could afford to buy a home and pay cash.
Now that we have dispensed with that fairy tale, let's look at the real world.
Most people must borrow money to finance homes. Depending on the neighborhood you are selling, most people will use the same type of financing. In middle-class homes FHA and VA loans are often used. In upper-class homes, never. Well, hardly ever!
There is not a lot of use studying the nuts and bolts of loan types you are likely, even likely, to encounter. So ask your Broker – or a local broker if you have not decided on an office – what kinds of loans are the rule in his local market.
Learn the ones you will encounter often, and just get the general grasp of the ones you will seldom use.
Then learn Creative Financing.
Creative Financing is a euphemism for "putting a deal together." Banks and Savings and Loans are limited by law to rather normal transactions.
Obviously, there are occasions when second trust deeds, third trust deeds, promissory notes, secured loans, unsecured loans and swing loans are useful, and there are financial organizations that cater to these special requirements.
Since the risks are higher on these loans, the interest rates are higher. If you learn the advantages of Creative Financing you will substantially increase the amount of your commission because you will put more transactions together.
It is more important that your clothes match you than your clients or the neighborhood.
Since you are in a public relations job, I will assume that your clothes will be clean and neat, but a further dress code should not be required. If you work for a franchise that requires certain uniforms such as red coats, or gold blazers, then you may need to color coordinate with these required apparel.
For the rest of us, I believe clothes should not appear incongruous with our basic personality. Be comfortable. If you are basically an informal person then show your informality in pants suits or Hawaiian shirts – or even jeans and coveralls in farm areas. If you are a more formal person, then suits are fine.
I know successful real estate agents in upper income neighborhoods who wear sports shirts and agents in lower income neighborhoods that wear suits – and each is fine. I cannot imagine a precise and clipped upperclass British accent from a person dressed in jeans.
I own a closet filled with three piece suits and Hawaiian shirts – and I dress in the mood I have on any given day. Sometime I feel formal, and sometimes informal, but my informal wear is Tommy Bahama and not Hilo Hattie’s. (No knock on Hilo Hattie’s where I shop often in the Islands, but most of their ware is street ware not sales ware.)
Don't make a large initial investment in clothes. When you do buy clothes just stay with the clothes that make you feel comfortable and natural. Also, if you drop out of real estate you won't be stuck with a lot of new "work" clothes and no place to use them.
As an independent contractor, you are going to have to worry about your own medical and dental plans unless your spouse is employed elsewhere and has a family plan. You are going to need some coverage.
Establish an interest-bearing savings account to lay away a certain percent of your commission for the IRS, state taxes, sewer bond payments, and property taxes.
If you have anything left over, you can buy food.
Life is a risk – a calculated risk. Most people drive automobiles on freeways – few people (statistically) drive racing cars on road courses. Both involve the danger of vehicular speed. The risks are different.
Everyone intuitively figures odds hundreds of times each day and lives – or dies – according to their ability to outguess the odds. Successful people are better at determining the odds.
I am convinced that the discipline of the Naval Academy, where I spent four tortuous years, was unconsciously designed to teach odds. The rules were hard, the supervision strict, but everyone broke the rules at every opportunity until the punishment for the infractions outweighed, in the perpetrators' minds, the benefits derived from the infractions.
I vividly recall guessing that I could date a girl during Plebe year four times before being caught. Those were acceptable odds for me – and as it happens, I dated almost 30 times without being caught. Had I been caught every other time, I might not be married yet.
In real estate the intuitive use of odds is rampant. The property my Buyer wants is hot. If I am asked, do I dare recommend a low bid and take a chance of another, more acceptable, bid being submitted during protracted negotiations?
My Sellers are being presented an offer which is really two thousand dollars too low but my Seller has another home for which he is obligated, and the Buyer has two comparably-priced homes he might use as alternatives if the going gets tough. I will explain the situation to my Seller – but what will I recommend if the Seller asks my recommendation? It is always a difficult situation because it is not MY money.
Only today, as I write, a prospective Buyer wants to know – "What are the chances of another home of the type I want coming on the market while I try to sell my home in Los Angeles?"
And my answer is the best I can give:
"We have 20 homes on the market here now, and two meet your requirements. Historically, one home comes on the market each week – but you want an older home and by far the greatest turnover is in newer homes which are far more numerous. The best bet is that one home every three or four months will meet your general requirements – and one home per year will be exactly what you want."
All of which does not preclude a perfect home for them coming on the market next week – but the odds are that it will happen as I predicted.
Last week, an associate and I had to present an offer simultaneously with a competitive offer. Before we wrote the offer, we had to advise our client:
"The asking price is $489,900, and for that home – which should sell at $475,000 – we would normally recommend an opening bid of $470,000. Because of the competitive bid, however, we recommend $475,000, and the chances are still 50/50 that the competitor’s bid will still be higher.
The odds, however, are that a $475,000 bid will be high enough to cause the owner to counter both offers. Additionally, our offer must be contingent upon the sale of your home and a 72 hour right of first refusal. The odds are 4 to 1 that the other offer is similarly encumbered because about 80% are so encumbered at this time in this market. If you are a gambler, then we can remove that contingency and seek a longer escrow period, putting the pressure on you to sell your home or pay two mortgages at the same time. It depends on how much you want this home above all others and the risks you are willing to take to get this particular house. That maneuver would swing the odds in favor of your offer."
The prospective Buyer was not a gambler and elected to stay with his 72 hour clause. He lost to a Buyer who, knowing a competitive bid was coming in, elected to gamble enough to make a no-contingency offer.
Our Buyer made a no contingency offer the next day on another home. Many Buyers will lose a home or two while they are learning the realities of a local market, and because they do not have sufficient trust in their Agent to either ask for advice or take the Agent’s advice.
It is difficult for a successful couple, new to an area, to place great trust in a real estate agent whom they do not really know and who the couple believe has an economic stake in making a sale – any sale.
Some clients are simply impossible – or, more accurately, they cost more in time, expenses, and frustration than they are worth.
I have one as I write this – in fact she is the reason I write this. She made an offer on a local home six months ago through another Agent. She refused to answer a counter offer.
Six months later, she moved here to Southern California from New York and was stunned at how much the prices of the homes had risen. She should have bought the home she had bid on six months before. She kept saying, “I could have bought that home for x just six months ago!”
But now, she said, she was ready. Her husband had moved his entire plant to San Diego and she was cooped up in a tiny apartment after having lived in a 7,100 square-foot home.
After weeks of looking with several real estate agents, she presented an offer through me for a new home. After days of negotiation and a quick 300 mile midnight trip to get a Los Angeles attorney's approval, the transaction went into escrow. The house was withdrawn from the market and the builder held up the selection of the unfinished plumbing, hardware, and appliances until the lady made her selections.
Ten days later, the lady cancelled escrow – she really didn't want a two story home. (The home had been two story right from the beginning of course. No one changed it on the tenth day of escrow.)
A couple of weeks later the lady, apologetically, called and was ready to look again. Since she had seen almost everything except two or three new homes on the market we showed her two – and one of them was JUST what she wanted.
Her long-suffering husband saw it and said, “Fine, if you want it, buy it.” Into verbal negotiations this time – the home listed at $652,500 – he offered $640,000 cash. The builder wanted a short escrow and agreed to two weeks. An agreement on changes was about to be made when, again, the lady changed her mind.
Twice a satisfactory home had been found for the lady – two houses in an area where only 20 homes are usually available and there are never more than 7 within her announced price range.
The situation is impossible. This woman had entered negotiation on three homes she liked and each time the price was reasonable for that house. In each case the homes could be bought from the couple’s change pocket – they were multi-millionaires. They were in each case very concerned about the price – but the market was moving up 2% per month and she kept saying, “Just five months ago I saw homes by this builder and they were $30,000 less. I think that's a lot of profit for him.”
As I write this she is sitting in her small apartment waiting for the prices to come down.
Lots of luck!
(Postscript: This happened in the late 70s, and obviously I have changed the prices to reflect the modern prices. I finally told the couple I could no longer represent them. The wife was shocked, but the husband understood although he was not happy. The couple bought land and built. I am certainly glad I was not their builder!)
Clean your office, clean your car, clean your glasses, clean your ashtrays – and most of all, clean the windows in your car.
Your office can be cluttered, your suit rumpled and your car’s engine can be chugging – so long as everything is squeaky clean.
Nothing will turn off clients as quickly as a dirty ashtray, wrappers on the floor, or a smeared windshield. The three things that clients see are your office, your car and you. Before they ever see a house they have subliminal views that are either positive or negative toward you and those views will color your word descriptions of homes and neighborhoods. If your car is a mess, the clients are not going to put a lot of stock in your description of a home as immaculate.
Suggestion – keep a small cardboard box in the trunk of your car, containing:
7. A box of chalk to write addresses on open house and direction signs.
One of the first and most often asked question is "How long does it take to drive to town?"
Of course, the answer will vary depending on the time you start your commute and to what part of town, but be prepared to give a specific answer.
“My normal driving time from here to the corner of Fifth and Broadway downtown is 27 minutes if leave home at 7:30 AM.”
Be sensitive to construction delays and traffic buildups and advise your potential Buyers of those problems. You may make a sale to an out-of-area Buyer by cutting a few minutes off the actual commute time, but more likely the truth will dawn before the deal is consummated. Most certainly, a white lie here will cost you a bad name for years and a future listing, so even a white lie will be costly.
Exact knowledge of the school boundaries and bus schedule will take care of the second most-often-asked question. This is another area where specific answers are impressive.
“The elementary school that serves this home is Mt. August and it is seven blocks away. The school bus stops on the corner right over there at 7:35 and Mt. August students are testing above the national norms in reading and math.”
That answer should satisfy anyone, and certainly is more professionally impressive than “I think your children would go to Mt. August Elementary School which is just a few blocks over there. I understand there is a school bus. Mt August is supposed to be a pretty good school.”
Be a professional, and a sound professional. If you are specific and accurate you will sound professional. This is a business of accuracy – you intuitively understand that you must do your math accurately so why would you think that you can be slipshod in other areas?
No doubt you have been exposed to that mass of unintelligible gobbled gook that passes for interest and principal tables. They are excellent and accurate and bulky – and not conducive to making you appear professional in front of your client. The first time a client asks what his monthly payments will be, you are going to be standing in the kitchen of someone's house and that is no time to haul out a book and fill out a Buyers Cost Sheet.
The client knows within $100 before he asks the question. As an immediate answer he needs to know within $45, and he doesn't want a long and laborious solution.
So let’s make it easy. Check to see what the generally prevailing interest rate is in your area. One of the local title companies probably produces a weekly summary sheet and you can just read down the 80% loan column since the majority of loans are 80% loans.
*As this is written, the prevailing rate in my area is 7% but the trend is upward. Now I look in the book that lists principle and interest repayment for 30 years and discover that if I check the amount necessary to repay $1,000 at 8 1/4% for 30 years the answer is 7.83.
*Now take a small replaceable label and write 7.83 on the label and stick it on a conspicuous spot on your pocket computer.
*Any time you are asked "What are my payments on a $723,000 loan, you simply multiply 723 x 7.83 and that is your answer.
As the rates change, so should the tab that is on the face of your computer. Store this number in a memory that is not automatically erased each time the computer is switched off. This number is the single most usable number that you can have available.
If you do not deal in residential real estate, but in raw land, then your most useful number is probably 43,560 ‑ the number of square feet in an acre.
If you are primarily interested in your commission split, perhaps your most useful number is a constant derived from your commission contract.
For example, suppose my broker pays me 70% of the office income if I sell another person’s listing ‑ and this is my most common sale. If the usual listing is a 6%, and the listing and selling offices split the commission ‑and that is the usual case ‑ then my office will get 3% of the sales price. If my constant calls for a 70% split between my broker and myself, that means I get 2.1% (70% of 3%) of the selling price. Once you write the 2.1, or whatever your constant is, on your computer you can save going through all of the computations each time you make a sale. You may make so many sales that you won't want to go through all of the computations.
In fact, you can come up with a long series of useful constants that will fill the back of your computer.
Even as I write, I can think of some new uses for a constant table.
For the uninitiated, Murphy's Law states, "If anything can go wrong, it will" and it has a number of specific applications in separate fields. In engineering for example: "That key component whose failure will cause the most damage is the component most likely to fail," and "In kit assembly, that unit most necessary is the one most likely to be missing."
Real estate also has its Murphy Law applications. One is, “The prime Buyer for any given piece of property will come in your office immediately after the property is sold by another agent” and its corollary, “immediately after any listing expires or is withdrawn from the market, a sales agent will have a hot client.”
These never fail. Three weeks ago, another office sold a two bedroom listing our office had for weeks. Our office had no one during the listing who wanted a two bedroom custom home on an acre of land – and that is not unusual. How many couples want all than land?
Today, the answer is four. Today, I am working with four separate couples who want a two bedroom home on an acre of land!
Now there are NONE listed!
Where were these people three weeks ago when I needed them!
You will have the same problem.
If your state uses escrow procedures, perhaps you don't understand its purpose.
If two people bet on a fight and ask a third person to hold their money, the third person is the escrow company[agent? A person can’t be a company.]. He holds the stakes until the issue is decided, then pays out the money. Obviously, he should be independent.
A real estate escrow company is a bit more complicated, but fundamentally the same. Buyer and Seller in real estate each have a number of things to do before the transaction closes. The escrow company verifies that each party does what he must – the Seller must sign the Grant Deed over to the Buyer and give it to the escrow company, and may have to get a termite report done, or repair damage, or repaint the house or whatever he had agreed to do. The Buyer must successfully arrange financing, and must have a home inspector inspect the home (if that’s in the offer to purchase).
When the escrow company is satisfied that everyone has successfully completed his part of the bargain, then the escrow company takes the money from the Buyer and gives it to the Seller and takes the Grant Deed from the Seller and gives it to the Buyer, while paying off all outstanding debts on the property.
Obviously, it is very important to select an escrow company that is efficient, reliable, and independent.
The independent part is the difficult part. Many California real estate firms also own their own escrow companies under a separate corporate seal and with a different name. By law, they may handle only those escrows that the home company represents.
The same holds true of those you must deal with in the business – the financial institutions, escrow offices, etc. They should be efficient, reliable, and independent. Be pleasant, be positive in your dealings with them.
One of the easiest ways to learn what is going on in your local market – and to impress clients with that knowledge – is to become a STATS FREAK.
You will find that at most cocktail parties, the subject of home prices will become a subject of discussion at some point during the evening. As a real estate agent, you will be expected to be the source of expertise, and as their eyes turn your way, you drop the KNOWLEDGE BOMB.
"You are certainly right about prices – last week, four Capricorn models closed escrow at an average of $376,926, and three Big Sur models at an average of $281,522. The average of the 26 homes for sale right now is $380,395 – and the mean is $377,500."
You have just established yourself as more than a cut above the average real estate agent – there isn't another real estate agent in the room that has taken the time to do the five minute simple statistical review necessary to know those EXACT numbers.
Even more important than appearing smart about real estate, you have become smarter about real estate. The average price of homes for sale in the area tells you something – something quantitative! Comparing the average sale price to last month's average tells you a lot more. Months of comparisons of average sales prices overall, and of different models, gives you an amount of knowledge that puts you a step ahead of your competitors.
That's not a bad place to be.
And, after the next bridge game, or tennis match, some acquaintance of yours will tell their spouse:
"Mary Jones and I played bridge today – she is with Beautiful Homes Reality, you know – and she said three of the homes just like ours sold last month for an average of $281,522."
(That's another professional secret – Don't round off numbers. Take all numbers you know exactly and give those numbers out EXACTLY. It sounds professional.)
The biggest mistake I made in my first year – though by no means my only mistake ‑ was to fail to take advantage of an opportunity to protect MYSELF.
While sitting an open house on my first listing, a couple came in and while admitting that the open house did not meet their needs they described their "dream house." My wife, Jean, recognized the similarity of their wants with a home that was on the market less than a mile away, and I drove the potential Buyers to the home and showed it. The home had been on the market for some time and over the next week, I re‑showed the home to the couple several times. The couple owned a large home that they had to sell. They put it on the market with another real estate agent and informed me that they would sell through that agent, but if the home I had showed them several times was available when their home sold, they would buy through me.
Being a new agent, and very naive, I accepted their statement without question.
California law and California Realtor ethics are fairly simple – if an agent shows property and the property is actually sold through another agent, the agent that gets the check from the Buyer has the transaction. After all, the buying public has the right to select which agent it has confidence in, and simply because you show property first does not automatically mean that you have the deal. The Buyer can elect to make his deal through another agent because the Buyer doesn't like your looks, your manners, or your breath – or lacks confidence in you.
But if a Buyer whom you show decides to await the ending of the listing and go around you and all other agents, that is a NO-NO! You can protect yourself against that possibility for 90 days by informing the Seller, by letter, of the names of those people to whom you have shown his property. Should one of them subsequently buy the home directly from the owner within 90 days, you are entitled to your full commission.
Being naive, or stupid, or just plain too trusting, I failed to notify the Seller OFFICIALLY (which is to say by registered letter) of the potential Buyer's name. I had, during one of the showings, introduced the Buyer and Seller, but had not done so in writing. That failure to protect myself with a two minute note and less than one dollar in stamps cost SEVERAL THOUSANDS OF DOLLARS.
It will happen to me again, no doubt. I can hardly keep track of everyone that I show houses to, much less the different houses, dates, and when those listings may expire. In the long run, it probably doesn't pay to try to notify each Seller of each Buyer, but if you suspect someone may try to go around you, or if you show property near the known end of a listing, protect yourself!
It pays to know a good, and intimidating, attorney. In fact, just the fact that you know a very good, and very intimidating, attorney can save you a lot of money and hassle.
Get yourself a good attorney – one whose name alone is an intimidating weapon in your community. In the long run his higher fee will be offset by the fact that you may seldom need to use him.
Many real estate firms hire their managers, or bring in outside help, to increase the motivation of their sales force. The lure of high commissions alone apparently is not sufficiently attractive to get everyone off their duffs.
The problem is that external motivation has a low retention rate among most people, and must be reinforced by constant doses of "Rah, Rah."
And therein lies a problem.
National Football League coaches select players based on the player's motivation and the methods necessary to motivate them. Some coaches are fantastic motivators, like George Allen was when he was with the Redskins. After a George Allen pre‑game talk, his players would run through a brick wall just to get at the opposing team. Other coaches, like Tom Landry of the legendary Cowboys in their prime, select self‑motivated players and the Landry-type coaches' pre‑game speech was hardly longer or more inspirational than "Gentlemen, today's opponent is the Green Bay Packers."
Real Estate offices should draft prospective salespeople with as much foresight – but they don't. Some offices have highly inspirational managers, who employ the latest motivational techniques, such as video and audio cassettes, and these turn on the salespeople who thrive on inspirational fixes. Unfortunately, it turns off the self‑motivated, who are also usually required to attend. Similarly, offices that have a self‑motivated manager usually believe that everyone is equally self‑motivated and probably do not provide a sufficient inspirational program for those on the staff who could use it.
Either technique, inspiration or self‑motivation, is equally successful, depending on the personalities involved. But if your need is at cross purposes with the office policy, then you are going to be miserable.
No amount of external motivation can replace self‑motivation, but the truly self‑motivated, positive personality is truly rare.
Most people need some external motivation, some new ideas, some new way to do the same old things, so that the basic sales pattern can be less repetitive and more spontaneous.
If you can't be positive, at least don't be negative! Everyone has had a summer cold, has had problems with their children, has lost a sure bet listing or sale, and has had a problem with their car. If it is really therapeutic for you to mention one of the above to someone, then do it. But don't dwell on the subject to everyone. Particularly with clients.
Your co‑workers may, on occasion, get so busy that they have to give clients away on an agreed percentage of the commission – called a referral fee. Obviously, no agent is going to send their extra clients to another salesperson who does not have the potential to get the clients into escrow.
Even if you are brand new, you can hope for such spillover if you are confident, positive, and well groomed. (In fact, if you meet those standards, no one will know you are new.)
What's the difference between a FISBO and a football? Read on, because if you had trouble with the State examination definition of avulsion, consider these more useful terms:
FISBO, pronounced ‘FIZZBO,’ is an acronym for that bane of timid salesman, the FOR SALE BY OWNER. Since the greatest majority of FISBO's are eventually either listed and sold by real estate agents, or are sold by the agent through some private agreement with the owner, a FISBO is a gold mine looking for a good Llister. A FISBO sign is a visible sign of a motivated Seller.
FOOTBALL – A football is a badly overpriced home, so called because it is said that agents kick it every time they pass. Actually, it is often shown so that one of the agent’s more-properly-priced listings will look much better to the prospective client.
SHOWS WELL – A home that has great decorator touches and a good housekeeper to make it a pleasure to show. Also known as a "doll house."
GOING BEHIND THE SIGN – Ethics require that once a home is listed, other firms respect that contract until the day it expires. Some agents "go behind the sign" to try for the next listing period while the first Lister’s sign is still up. In pro sports the charge is "tampering."
FLOOR TIME – That time in the office in which you are the "up" or on-duty agent. Any "drop in" calls or visits not specifically asking for another agent by name, are yours. Floor time is much sought after by new agents without a large personal following. Some offices get many "drop ins," some very few, depending on their location. In theory, as an independent contractor, you must sign up for floor time and it cannot be assigned to you. Practice may vary widely from the theory, however, as everyone would only sign up for weekends.
COMPS – The actual sale prices of comparable properties that have recently sold. Comps are one of the numbers that agents live by – you must have a good head full of them and know what books to find all you cannot remember. The comps give you the answer to two of the most important questions in real estate:
(Seller) "How much is my home worth? And (Buyer) "How much should I pay for this home?"
LB – The house has a lock box.
CB4 – Call the owner before showing.
FANG – Forced air natural gas heating.
CONV – Conventional loans only, no VA.
CTL/CTNL [CTLN?]– Cash to loan (Buyer may assume Seller's loan) or cash to new loan (Buyer may arrange own financing).
COE – Upon Close of Escrow.
BOM ‑ A home is "Back on the Market" – it may have sold and fallen through, or it may have been temporarily withdrawn by the Seller.
SAME LENDER – Most lending institutions charge a borrower a pre‑payment penalty if the loan is paid off before a period of time, unless the new Buyer of the home refinances through the same lender. This notation tells a prospective Buyer that he cannot shop for his loan – it must be at the same lender the Seller has.
SUBMIT – The Seller is flexible and the price is not firm, so submit your offers for consideration.
FIRM – The Seller – at least as of the day the price was written – is firm in his price.
NEGOTIABLE – Usually refers to items not included in the sales price – such as children's play equipment or freezers or even washers and dryers – that Seller will sell outside of the agreement at a negotiated price.
CO‑OP – Between agents, it means to split a fee, usually equally. When talking with a FISBO, it means that you will work that home for the Selling side of the commission. (The agent that sells a co‑op gets the same amount as if another office had listed it, but the Seller saves the Listing side.)
CARAVAN – A time set aside, usually weekly, when all local agents troop through all the new listings to preview them. This is the easy way, for the Sellers, the sales agents, and the lister, to get this over with at one time.
SWING LOAN – A short term loan, usually 90 days or less, to permit a Buyer to buy a home before his home sells.
CARRY PAPER – The Seller may offer to carry a second trust deed on the house for sale, or "carry paper" (a second trust deed).
LOCK BOX – A portable miniature safe which can be attached to a front door handle or a hose end. A lock box contains the front door key, so that real estate agents can open and show the home even when the Seller is not home. Care must be taken to guard the master key that every real estate agent carries to this lock box because a burglar would love to have front door entry to every home for sale in an area. Luxury homes may not permit lock boxes for this reason.
MULTIPLE OR MLS (Multiple Listing Service) – An organization of real estate agents that shares all of their listings so that each agent can co‑op on all the listings in an area.
DOUBLE ESCROWS – Taking a very long escrow and reselling the property during the escrow so that both sales close at the same time. This permits the first Buyer to take advantage of the general climb of the market during the long escrow period.
Suppose you are called over to list the home of a retired movie idol. "Look," he says, "My wife and I are going to Europe to live starting next week. We all know that this house is worth $250,000, but I'll sell it for $225,000, if you can find me a Buyer within the week. I'll take a long escrow – even a year if necessary – just so I can get into escrow before I leave for Europe."
That is your chance to make good money by double-escrowing the home. For a deposit of, say $2,500, you purchase the home for $225,000 with a one-year escrow. Immediately upon entering escrow with $2,500 of your own money, you offer the home for sale at $275,000.
If the home was worth $250,00 originally, and the market was rising at 2% per month, then its value is rising $5,000 per month. It should be worth the new asking price of $275,000 within five or six months – leaving six months to sell and close escrow on the property.
If you can do it, then for a $2,500 investment you get a return of $50,000. You must, of course, be prepared to "buy" the home if you cannot sell it during the long escrow you have agreed upon, or you must forfeit your initial $2,500 and also your client. All parties involved in this type of escrow must be aware of the double escrow.
(You are more likely to hear of other people "double escrowing" than doing it yourself – at least at first!)
SPEC BUILDER – An independent contractor who buys a lot and builds a home to sell on the speculation that he can make a profit. The speculation builder must put his own risk capital into the building.
SIGN CALL – A call made to your office from a prospective client as a result of the client seeing your real estate sign in front of a home for sale. Statistically, a very high percentage of sales originate as a result of such "sign calls" – which is one reason that Brokers like to have a lot of listings. Signs draw more business, by far, than do advertisements.
AD CALL – A call to your office as the result of an advertisement. Statistically, a small number of sales result from these ads, but everyone continues to advertise if for no other reason than to please the owners whose homes are advertised. And of course, some homes are thereby sold. (Some studies show that almost 60% of home sales are sold from signs in front of listings, 30% are referrals, and 10% from newspaper ads. Different geographical areas and different price ranges will probably give different results – but I can live with these ratios.)
DEFERRED MAINTENANCE – A euphemism for a "fixer upper" that is a mess and needs work.
BUYER REMORSE – A common malady that afflicts many Buyers – a concern that they may have bought the wrong house or spent too much. Strikes hours or days after signing the papers.
PENCIL OUT – To determine a reasonable profit. A Buyer of investment property will take his cost and after figuring income, upkeep, depreciation and other items see if the property is worth the cost to him – or will "`pencil out."
Nothing can queer a transaction as fast as getting an attorney into the act – unless his commission, like yours, is contingent upon the sale.
Attorneys get paid to be cautious and they could not demand their high fees if they did not find lots of potential faults. Attorneys are by nature, by education, and by philosophy, conservative. They tend to ask a lot of "What if" questions, and the answer to those questions can make the attorney cautious enough to interject complicating statements into transactions.
Of course, with very complex transactions an attorney can also find a way to make it work.
My most complicated residential transaction – an almost three million dollar tax-free exchange including an estate, four rental residences and two lots, had no attorney directly involved although both parties to the transaction cleared their separate parts through attorneys. In each case the principals involved remained in charge and separately asked their attorneys for advice only on specific issues.
Selling a home to an attorney, or for an attorney isn't necessarily a problem (although I do personally avoid representing attorneys in any manner) – but selling a home to or for someone who brings in an outside attorney who has no stake in the sale can be a big problem.
Attorneys, themselves, can make great clients. They know what they want and how to get it. Clients with attorneys make poor clients. I avoid attorneys so much that when I advertised my own personal home for sale I specified “No attorneys need apply.” This annoyed some local attorneys. One even threatened me with a lawsuit. That is why I avoid attorneys. They always think of lawsuits as the first solution to every problem. I told him to bring it on. Attorneys are not a protected class under the law and I would have loved the publicity his lawsuit would have produced for the sale of my home.
I previously discussed a client whose attorney had to approve the contract before his wife decided she really didn't want a two story home.
Real estate is a business where even if you do everything right, you may still not get paid. In this case, the attorney and the engineer received a fee for their labor. My labor, though longer and harder by far, was not rewarded with a cent.
Attorneys can be a good source for business, especially if they handle divorce cases. Divorce usually ends with the sale of one home and the purchase of two others, and the attorney is always looking for competent real estate agents who can expedite a sale with the sensitivity necessary to deal with parties who are in a strained relationship.
If you are fortunate enough to be selected by an attorney for this kind of sensitive work, remember that it is illegal and unethical for the attorney to receive a referral fee even though it is legal and ethical for you to give it.
However a Christmas or birthday gift of a case of something good to drink is in order.
A written listing protects EVERYONE. It guarantees deliverability, it sets the price and the acceptable terms, and it protects your commission.
Right from the start you are going to get involved with neighborhood homes that you know are for sale, but for which you don't have a listing to protect you, land that is not listed and is owned by a syndicate (some of whose people want to sell and some who do not), FISBO property that you only have verbal agreement on, and so on.
Can you deliver? What happens if your neighbor says, "I'll sell this home in a minute if you can get me X dollars for it"? You bring her a qualified Buyer at that price. Suppose her husband has just been demoted and she now can't afford the new home she was hoping for.
Suppose that land syndicate has had a $3,000,000 price tag unofficially on that parcel for years and after you bring them a qualified Buyer they raise the figure to $4,000,000 – or decide not to sell at all.
Listed property must be sold to a qualified Buyer who meets the price. Unlisted property cannot be guaranteed to be delivered at any price. Try to get a short term listing before you expose the potential Buyer to the property. If you can't get even a short term listing then be prepared for problems – the potential benefits may outweigh the potential problems, but enter the transaction aware that you are not protected, you may not be able to deliver, and you may end up with egg on your face.
(brand name recommendations in parenthesis)
· 50 foot retractable steel tape
· 50 3x5 cards
· Electronic calculator (nothing elaborate, just accurate)
· Business cards
· Forms: listing, residential, land offer and counteroffer
· Office stationery, envelopes and stamps
· Five ball point pens (BIC)
· Realty Blue Book (professional publishing cord. )
(brand name recommendations in parentheses)
· Windshield washer (Dupont glass cleaner)
· All purpose cleaner (Simple Green)
· Plastic protector (Amorall)
· Paper towels
· Paper napkins or handiwipes
· Dust cloth (Kozak Super Cloth, Auto Drywash Inc., Batavia, N.Y. i4020) [check the ZIP code]
· Five-pound hand sledge
Send mail to
firstname.lastname@example.org with questions or comments about this web