“For most banks, loans are the primary use of their funds and the principal way in which they earn income. Loans are typically made for fixed terms, at fixed rates and are typically secured with real property; often the property that the loan is going to be used to purchase.”
Real estate is in a constant state of flux. With advances in technology, industry changes can happen faster than they ever did before. Such changes are happening again in real estate.
The Voice of Real Estate, an industry news reporting arm of the National Association of Realtors announced sweeping changes brought about by the Consumer Financial Protection Bureau that will affect the closing process nationwide. These changes include the retirement of the HUD-1 closing statement, the Good Faith Estimate, and Truth In Lending. They will be replaced by two new forms: the Loan Estimate and the Closing Disclosure. All paperwork must be finalized no later than 3 days prior to closing. If last minute changes are made, it could trigger the three-days to start over again.
Also covered in this latest news piece:
New proposed rules concerning the use of drones in real estate
Foreign investors increasingly interested in American commercial real estate
The first of the 13 behaviors of trustworthy people and organizations is “Straight Talk.” As described in the book “Speed of Trust” by Stephen MR Covey:
“Straight talk is honesty in action. It’s based on the principles of integrity, honesty, and straightforwardness…it means to tell the truth and to leave the right impression” (Covey 2008, p. 137).
What it Means to Talk Straight in Real Estate
This means being transparent in all dealings. Ideally, when something is wrong with a loan or real estate transaction, the people involved will communicate in the spirit of mutual respect and consideration instead of dodging phone calls, and ignoring emails. It means talking through the issues in search of a solution, if one is available. If a solution cannot be found, then an honest discussion of the circumstances is in order, as well as a discussion of the steps required to resolve the situation.
Too often businesses throw clients and customers away when they do not fit the “perfect mold” of an ideal business situation. Uncovering and discussing obstacles and challenges in a straightforward way shows that a business cares about the success of its people. How else can a person succeed if they are kept ignorant to the things that are holding them back?
To break through the challenges, customers need to know what they are up against. Talking straight is the only way to make these problems known, so that customers can become aware of the issues, tackle the challenges head on, and ultimately overcome them. Honorable professionals are not afraid of talking straight, because they know it is the right thing to do and they recognize the power it has to help a customer discover the source of their problems and succeed. The value of talking straight is the trust that binds and builds over time. It happens naturally when people begin to realize results, as they work through the challenges with mentors and coaches who truly care about them, and value their business.
The Opposite of Talking Straight
“The opposite of straight talk is to lie or to deceive. Such behavior creates a huge tax on interactions—either immediately or at some later time when the deception is discovered” (Covey 2008, p. 138).
Nothing kills trust faster than a liar. These are the people who would say and do anything to extract the next dollar from customers. They make promises that they can’t–or never intend–to keep. They hide behind the legal jargon of their contracts to get away with not providing the value they promised. They are very time-focused and not results-oriented. When the going gets tough, they tend to fall silent and hide instead of rolling up their sleeves to play an assertive role in helping customers get at the core of the issues that are in the way. Instead, these so-called “professionals” believe their time is worth paying for regardless of whether—or not—they are successful in bringing about the results needed; such as, a “mentor for life” who goes missing in action at the first sign of a challenge, or a lease option “guru” who traps people into expensive contractual obligations, but who fails to create accountability or deliver real value; which is to solve the problem they were supposed to help solve.
Instead, they will sit on the phone and bull-shit with the customer for the allotted time without providing any real value to run the clock and bill against time wasted. By the end of the contract period, the customer is no better off than before. It is hard to understand how such a person can live with themselves after conducting business this way; because to someone who is a real and honest professional, nothing is more satisfying than the feeling of helping customers get the results they want and need.
The Counterfeits of Talking Straight; More Trust-Destroying Behaviors
The counterfeit of talking straight includes “beating around the bush, withholding information, double-talk (speaking with a ‘forked tongue’), flattery, positioning, posturing, and the granddaddy of them all: ‘spinning’ communications to manipulate the thoughts, feelings, or actions of others” (Covey 2008, p. 139). These are all telltale signs of untrustworthy people and organizations. They are so scared of being pinned down or caught in a lie that they start to dance around the hard questions. They cannot be straightforward about the issues at hand; because the truth is as ugly as it seems. Take for example; a lender who crams junk fees into its compensation structure, and who creates convoluted reasons for justifying them.
One such lender asserted that a borrower would have to pay a $1,600.00 “risk fee” in addition to 5 points plus customary closing fees for every loan they would fund, if the borrower did not pay a one-time fee of $1,700.00 to join it’s so called “exclusive” 100% loan program. The lender told this borrower that they would not be allowed to use gap funding (even from their own credit lines) if they did not pay the $1,700.00 to join its 100% funding program. It was a slimy manipulative tactic to extract fees from the borrower knowing that the borrower was under contract and had a time-sensitive obligation to close on a property within 30 days.
As with any industry, there are good and bad players on the field; however, there is a way to discern the difference between the two, and it begins with straight talk.
Real estate is a team sport. How well a team performs as a whole depends on the quality of contributions made by each individual member, as well as how each key player functions within the context of delivering results for a successful outcome; on time and under budget. The cost and speed of success depends heavily on a key ingredient that can make or break the efficiency of a team and–in turn–the success of a project. That ingredient is trust. More specifically, that ingredient is smart trust.
In a book entitled The Speed of Trust (2006), Stephen MR Covey points out that although trust is largely misunderstood, it is critically important to learn the “how” and “why” of building trust to increase good will and efficiency of the team. A compelling excerpt from Covey’s book reads as follows (Covey, 2006, p.1):
The One Thing that Changes Everything
“There is one thing that is common to every individual, relationship, team, family, organization, nation, economy, and civilization throughout the world–one thing which, if removed, will destroy the most powerful government, the most successful business, the most thriving economy, the most influential leadership, the greatest friendship, the strongest character, the deepest love.
On the other hand, if developed and leveraged, that one thing has the potential to create unparalleled success and prosperity in every dimension of life. Yet it’s the least understood, most neglected, and most underestimated possibility of our time. That one thing is trust.”
When placing this idea within the context of the real estate industry, it is apparent that trust is rare; if not altogether missing. Covey explains how trust can be established, developed, and nurtured by constantly getting better at what we do, and aligning our actions with behaviors that embody trustworthy character and competence.
Trustworthiness and credibility become self-evident. When combined with the energies of people who can see and focus on the same vision, team synergy can produce results better than the sum of all parts.
The High Cost of Low Trust
Trust has an economic impacton all areas of life and business; a trust “tax” when trust is low, and a “dividend” when trust is high (Covey, 2006, p.13). It directly affects the speed and cost of making things happen. To illustrate the point, Mr. Covey dedcribes how the events of 911 impacted the speed and cost of the check-in and boarding process at airports worldwide, as well as the effects of the Sarbanes-Oxley Act that was passed in response to scandals such as WorldCom and Enron. (Covey, 2006, p. 13-14).
When trust is broken, it significantly raises costs and adversely impacts the speed of getting things done. Low trust slows down the pace of accomplishing things, while increasing the cost of accomplishing those things significantly (Covey, 2006, p.13). This applies to all areas of life and business; including the real estate business.
The Process of Rebuilding Trust
Building or rebuilding trust boils down to consistently demonstrating 13 trustworthy behaviors within the context of four categories, also called the “4 Cores of Credibility” (Covey, 2006); namely Integrity, Intent, Capabilities, and Results (p. 43):
These 13 trustworthy behaviors (Covey, 2006, p. 136-222) include:
Overall, these 13 behaviors can be used as benchmarks to measure all kinds of situations; whether it means evaluating a contractor, a coach, or any other member of the investment team. In fact, after benchmarking against these 13 behaviors, stark realizations may come to light. You may discover and realize that you don’t have the right people filling key roles in your organization; or on your team. When such a discovery has been made, it becomes imperative to replace untrustworthy people as soon as possible with people who strive to be trustworthy, reliable, and dependable. If not, the dynamics common to low trust cultures will adversely affect performance; increasing operating costs, decreasing the pace of progress, and ultimately devastating the outcome of the best laid plans.
In the coming weeks, I will be featuring a blog post about each of the 13 behaviors as they relate to real estate investing, as well as building a high-performance team of trusted advisors and professionals. It is a way of educating the market in an effort to raise the bar in an industry that typically functions in a toxic low trust culture; where most are in it for themselves at the expense of others. In this respect, educating the market is key.
As the market becomes more educated about trust and its 13 behaviors, the more power there will be to use benchmarking tools that will facilitate the process of building highly effective teams in the real estate sector. People will finally understand how to consciously nurture and build effective teams upon a foundation of high trust, mutual respect, and consideration starting with ourselves.
Vacancies have risen and more units are expected to hit the market in 2015. Despite this news, apartment fundamentals remain strong due to more people choosing to rent than to buy. Here is the latest video by REIS Reports discussing the topic in more detail:
Real estate has become quite a circus with the latest and greatest strategies and “proven” processes hitting the inbox at the speed of a mouse click.
Anyone who has been in the real estate business for any amount of time has experienced the barrage of gurus, coaches, and programs that promise results; but only end up generating maximum sales for themselves. Many are good at delivering information, but fail to deliver tangible value in the form of a personalized customer experience that helps businesses identify and implement solutions to pressing business problems. As a result, intellectual capital without support is ineffective and value-deficient.
Customer Experience is Key to Creating Customer Value
In order to realize value, coaching programs and services must deliver a personalized customer experience that meets the customer where THEY are in their businesses. It does not force customers into a cookie-cutter style program that may or may not address the customers current situation, or that duplicates a customer’s existing base of knowledge. A personalized customer experience provides solutions that are relevant to the customer’s unique situation. Such products and services improve the lives of its customers in terms of solving business problems; whether it concerns improving operations, systems, or processes. A personalized customer experience goes beyond group coaching calls and receiving automated mass mailings.
A good coach takes a vested interest in the success of their clients and customers individually, because it becomes a direct reflection on the quality and effectiveness of their service. Customers invest resources in order to gain a benefit. The expected benefit is a solution that solves a business problem. Often times, coaches sell their wares and then forget about customers after the sale. Ideally, coaches remain present and engaged in order to provide support to help customers and clients realize their end game.
Good Coaches Do Not Disappear
Good coaches do not disappear when times get tough or challenging. They are truly present and they have a moral obligation to help customers and clients work through the issues that prevent them from realizing their goals. Bad coaches disappear, disconnect, and only re-connect when they want to sell something else. Once a bad coach or guru has revealed themselves as such, it is better to cut losses and disconnect immediately upon detection; because if a coach cannot deliver products and services in a way that is relevant to the customers’ business then that product or service is ineffective; thus, a waste of money.
Effective Solutions Produce Effective Results
Effective coaching services are results-driven, and should begin with an assessment of the customers’ business situation. Cookie-cutter programs are not designed to do this; therefore, they are a waste of money. Every coaching experience should build trust, credibility, and should drive results in a customer’s business to be considered a good investment.
Here are three signs that a coach is good or bad:
1. Good coaches take a personal interest in the success of their customers, and they personalize their solutions to fit the customers’ individual business needs.
It is not enough for a coach to say that they have a vested interest in your success. They must–in fact–prove this by their actions, through their behavior, and in their attitude.
Some questions to ask when evaluating a coach:
Are they proactive? Do they make it a point to reach out to you personally (not just through mass mailings)? Do they work to keep you accountable and on track to accomplishing your goals, or are they suddenly missing in action and unresponsive? Do they make excuses for not being present, or do they own up to their short-comings and work diligently to make things right with individual customers? Do they offer customers full support, or do they leave out critical pieces of information in order to induce customers to buy another product or “higher level” of service later on?
2. Good coaches are responsive and communicative.
They don’t leave you hanging, and they don’t treat you like a pest whenever you have a question, or you are seeking their support. Good communication is critical to good relationships whether personally or professionally.
3. Good coaches are results-driven.
With a vested interest in the success of clients and customers, good coaches know that their success is tied directly to the successes of their customers and clients. As such, they will work diligently with customers and clients to identify and troubleshoot problem areas, work towards designing a plan to solve the most pressing business problems, and then proactively hold customers and clients accountable for completing the steps of the plan until they have achieved their goals. Anything less than this level of service is ineffective and a total waste of time and money.
The three considerations mentioned above forms the basis of a litmus test that can be used to determine whether or not using a particular coach is going to be a good investment. A good coach is a great investment that adds to the bottom line; a bad coach is a liability that drains from it. To be successful, businesses must be careful to choose the former and avoid the later; or they will find themselves depleted of working capital and eventually out of business entirely.
On a Final Note: A Brief Word About “Gurus”
On the lowest end of the totem pole, “Gurus” are nothing more than over-glorified information peddlers that use deceptive practices like posing for pictures in front of mansions they do not personally own in order to induce a sale. Save your money, and avoid them.
Be smart. Choose wisely. Take out the garbage, and save your money for only the best.
The National Rental Home Council, a new association of institutional single family rental housing operators recently released a set of operational guidelines for the standardization of operating single family rental housing. The NRHC is first of its kind formed to raise the bar in a growing industry of single-family owner.
Click here for a copy of the new NRHC Operational Guidelines.
JULY 30, 2014 – Dionne Searcey, NY Times | The United States economy rebounded heartily in the spring after a dismal winter, the Commerce Department reported on Wednesday, growing at an annual rate of 4 percent from April through June and surpassing economists’ expecations.In its initial estimate for the second quarter, the government cited a major advance in inventories for private businesses, higher government spending at the state and local level and personal consumption spending as chief contributors to growth. Economists, who had been hoping for a full reversal of the first quarter’s decline, were cheered by the second quarter’s numbers. The consensus forecast for G.D.P. was 3 percent.
WASHINGTON 07/09/2014 — The Federal Reserve said on Wednesday that it planned to stop adding to its bond holdings in October, in a sign of its confidence that the economy is gaining strength even as the central bank gradually withdraws its support.
Housing starts exceeded one million for first time since last year and housing permits were over one million for a third consecutive month. The increases were almost entirely in multifamily rental construction.
Multifamily construction soared 40% to 423,000 starts, the highest since January 2006 and permits also rose 20% to 478,000, the highest in almost six years. Multifamily starts were particularly strong in the Midwest where they more than doubled from an unusually low 42,000 to 100,000.