I came across an article called “All I Want to Do is Find a House.” His article talks about the current situation in the marketplace where lenders are requiring more accuracy and due diligence from borrowers as a result of the mortgage crisis and economic downturn. I think this is a relevant piece that should be shared with those entering the housing market to buy real estate.
I have seen many listing agents start out listing properties at below market value and then use the resulting flurry of buyer interest to spark bidding wars.
While this practice benefits the seller, and the listing agent would not be doing their job if they did not try to get the highest price possible for their sellers, buyers need to remember that this strategy only works when more than one buyer takes the bait.
Here are 4 things buyers should bear in mind about bait-and-switch tactics in real estate:
1. Remember, demand creates value, which increases prices. The opposite is also true. When demand goes down, so do prices.
By engaging in bidding wars, you are driving prices up.
2. If you want to find a truly great deal, then you most certainly do not want to render yourself a tool for sparking a bidding war.
Instead, find out the motivation of the seller. If seller or their agent appears evasive, take note, give them the benefit of the doubt once, and then move on if it appears that you cannot get straight answers. This is a red flag.
3. If you engage in the game of bait-and-switch, then be prepared to waste some time.
It is no wonder many investors prefer to look at unlisted properties, and save listed properties as a last resort.
4. Wise investors avoid bait-and-switch pricing games. They realize that there are too many good deals out there to allow themselves to be used as leverage in the ploy to get the highest price possible.
Smart investors do not get emotionally attached to properties. Emotions are the hooks that make pricing games work so well. Eliminate emotions from the equation and pricing games are no longer as effective.
In my experience, I have dealt with listing agents who did a super job of representing their sellers without taking an adversarial position with the party on the other side of the transaction. However, as with anything, there are those who do make adversarialism a part of their business practice. Some call it “posturing,” others might call it “positioning.” Either way, this approach to business infuses negativity into the transaction and it adds a dimension of distrust, which slows the process down or kills it and becomes a draining experience for all involved. If you have ever read the book The Speed of Trust by Stephen M.R. Covey, then you can understand the point I am making.
There should be a meeting of the minds. A seller wants to sell, a buyer wants to buy, and in the case where there is financing, a lender wants to lend. Sometimes, negotiations break down when the representatives for each of these parties cannot work together in order to identify and resolve the core issues that prevent the transaction from moving forward, or perhaps a representative is just “following orders” and does not consider ways to keep a transaction moving forward in a way that does not cause adversarialism to enter into the transaction. It is possible to accomplish this while keeping their parties’ interests protected. In this new age of real estate, mutual trust, respect, and transparency rule the day.
Hard ball tactics are a thing of the past, and to excel in these changing times, buyers and sellers would do well to find their own representatives that understand how to approach negotiations in an honorable way for the best win/win outcome. Otherwise, no one wins and everyone loses…time, money, energy. The way to accomplish this is to consider applying the 13 Behaviors of a High Trust Leader (Covey 2006):
1. Straight Talk
“Be honest. Tell the truth. Let people know where you stand. Use simple language. Call things what they are. Demonstrate integrity. Don‘t manipulate people nor distort facts. Don‘t spin the truth. Don‘t leave false impressions.”
2. Demonstrate Respect
“Genuinely care for others. Show you care. Respect the dignity of every person and every role. Treat everyone with respect, especially those who can‘t do anything for you. Show kindness in the little things. Don‘t fake caring. Don‘t attempt to be ‘efficient’ with people.”
3. Create Transparency
“Tell the truth in a way people can verify. Get real and genuine. Be open and authentic. Err on the side of disclosure. Operate on the premise of, “What you see is what you get.” Don‘t have hidden agendas. Don‘t hide information.”
4. Right Wrongs
“Make things right when you‘re wrong. Apologize quickly. Make restitution where possible. Practice “service recoveries.” Demonstrate personal humility. Don‘t cover things up. Don‘t let personal pride get in the way of doing the right thing.”
5. Show Loyalty
“Give credit to others. Speak about people as if they were present. Represent others who aren‘t there to speak for themselves. Don‘t badmouth others behind their backs. Don‘t disclose others‘ private information.”
6. Get Results
“Establish a track record of results. Get the right things done. Make things happen. Accomplish what you‘re hired to do. Be on time and within budget. Don‘t over-promise and under-deliver. Don‘t make excuses for not delivering.”
7. Get Better
“Continuously improve. Increase your capabilities. Be a constant learner. Develop feedback systems–both formal and informal. Act upon the feedback you receive. Thank people for feedback. Don‘t consider yourself above feedback. Don‘t assume your knowledge and skills will be sufficient for tomorrow‘s challenges.”
8. Confront Reality
“Take issues head on, even the ‘undiscussables.’ Address the tough stuff directly. Acknowledge the unsaid. Lead out courageously in conversation. Remove the ‘sword from their hands.’ Don‘t skirt the real issues. Don‘t bury your head in the sand.”
9. Discuss Expectations
“Disclose and reveal expectations. Discuss them. Validate them. Renegotiate them if needed and possible. Don‘t violate expectations. Don‘t assume that expectations are clear or shared.”
10. Practice Accountability
“Hold yourself accountable. Hold others accountable. Take responsibility for results. Be clear on how you‘ll communicate how you‘re doing–and how others are doing. Don‘t avoid or shirk responsibility. Don‘t blame others or point fingers when things go wrong.”
11. Listen First
“Listen before you speak. Understand. Diagnose. Listen with your ears…and your eyes and heart. Find out what the most important behaviors are to the people you‘re working with. Don‘t assume you know what matters most to others. Don‘t presume you have all the answers–or all the questions.”
12. Keep Commitments
“Say what you‘re going to do. Then do what you say you‘re going to do. Make commitments carefully and keep them at all costs. Make keeping commitments the symbol of your honor. Don‘t break confidences. Don‘t attempt to ‘PR’ your way out of a commitment you‘ve broken.”
13. Extend Trust (smart trust)
“Demonstrate a propensity to trust. Extend trust abundantly to those who have earned your trust. Extend trust conditionally to those who are earning your trust. Learn how to appropriately extend trust to others based on the situation, risk, and character/competence of the people involved. But have a propensity to trust. Don‘t withhold trust because there is risk involved.”
I have come to recognize the 13 Behaviors as a benchmark of character and competence that equates to a high degree of trustworthiness in all areas of life–business or personal. These 13 Behaviors can be used to measure any situation to clearly see where shortfalls are occurring not only with others, but also within ourselves, and when we take the necessary steps to change and make it better–great things happen.
Since real estate investors are in the business of real estate, it makes sense that investors would desire to have a profitable business instead of an expensive hobby. However, an important component to accomplishing this successfully is to avoid overspending and over improving investment properties.
An article on Invesdoor.com gives some helpful tips on what to do to maximize profit on real estate investments. Breaking even or losing money defeats the purpose of investing in real estate. Therefore, it is well worth the investment of time to gain insight into the strategies that are designed to curb over-spending and maximize profit potential from each and every real estate investment project.
The article points out three practical tips to prevent the over-improvement of real estate investments:
1. Consider the street that the property is on, and what kind of repairs should be made in order for the property to be in a comparable condition to neighboring houses on the same street.
2. Consider cost-effective improvements that attract the most attention; for example, kitchens and bathrooms.
3. Repair what is broken, but think twice before replacing anything unless cost of repairs exceeds the cost replacement.
I recently read an article at Invesdoor.com that discusses a few important things that cash buyers may want to consider when deciding whether to pick up properties at a bank auction or purchase REO’s. The information was insightful and compelling. Here are three points that stood out most for me:
1. Outstanding debts attached to property:
a. Bank Auction – the debt typically follows the property, which means that a new owner would inherit the debt attached to the property including unexpected liens and judgements (not good).
b. REO – Bank owned properties typically come with the assurance of clear title–meaning, no surprises after closing; or at least a complete awareness of liens or judgements due.
2. Inheriting Tenants:
a. Bank Auction – Properties sold at auction typically have existing tenants or owners still in place, which means new owners may have to bear the legal expense of eviction if current occupants refuse to vacate the property.
b. REO – Banks typically go through the eviction process prior to selling; therefore, a new owner may not need to bear the legal expense of evicting occupants.
3. Deal Financing:
a. Bank Auction – Buyers need all cash upfront usually.
b. REO – Financing and terms are often available; therefore, using leverage to increase purchasing power is possible depending on the specifics of the deal.
Read full article here !
NAEBA just released its latest press release regarding buyer agency and the confusion that occurs when traditional real estate agents call themselves exclusive buyer agents when, in fact, they are not because their companies also represent sellers:
Here’s an excerpt from the release:
“We believe it is important that home buyers understand their options so they will make the best choice when selecting an agent,” commented Benjamin Clark, 2010 President of NAEBA. “It is our mission to educate buyers on the advantages of using Exclusive Buyer Agencies and we want buyers to have that information before they sign a binding agreement with a real estate brokerage.”
A “buyer‘s agent” is not always an Exclusive Buyer Agent (EBA). Agencies may have singular relationships, representing buyers or sellers only or they can be a dual agent that represents both sellers and buyers at the same time. Within a dual agency brokerage, there may be “buyer agents” but this differs from NAEBA (http://www.naeba.org) member companies where both company and agents exclusively represent buyers and never take listings. In fact dual agents and dual agency companies may represent buyer and seller in the same transaction, with written consent.
Read full release: Real Estate Market is Coming Up Roses but Buyers Should Beware of Thorns
Could this be a sign that the economy may be slowly recovering? Home prices have historically been used as an economic barometer that clues us in on the state of the economy whether global, national, regional, or local. A friend of mine spotted an article by Les Christie, a journalist of CNNMoney.com and was kind enough to send it to me (thanks Bob!).
In this article Christie lists eight cities in the U.S. where home prices are rising. Of those eight, two cities I serve were mentioned:
Bremerton came in at #5:
“Home price forecast (1 year):* 4.2%”
“Home prices rose quite steeply here during the boom years, gaining about 110% between 2000 and 2007 and have declined only modestly since then, down 18% from their peak. But the city and its suburbs, nestled around the Puget Sound, have limited open land for building new homes, which props up resale prices. Plus employment is strong: The metro area’s unemployment rate was 7.6% in December, well below the national average.”
Tacoma came in at #8
“Home price forecast (1 year):* 3.9%”
“Tacoma’s downtown has gone through a revival over the past few decades, and its metro area lies within striking distance of some of the most spectacular scenery in the Pacific Northwest, including the Puget Sound, Mount Rainier and Olympia National Park.
Still, the local housing market has lost more value since its peak than did nearby Seattle. It did, however, outperform the nation as a whole.
It was quite a journey that began in July of 2009, but after nearly eight months of working through a difficult transaction and a series of close calls, we finally closed the sale on a newly built and beautiful 3 bedroom / 2 bath home in Yelm, WA!
As I accompanied my clients to closing, I relished in what was truly a day of triumph–with teary eyes–it was a day we all worked so hard to make happen.
We accomplished our goals thanks to awesome teamwork, mutual trust, and a strong spirit of professionalism and cooperation from all sides!
This week, my family will be celebrating with Miguel, Sharon, and Megan on a job well done!
Special thanks to Carolyn Frame and Martina Norman Maleski of Guild Mortgage, WA Trust Bank, Jim Selden and Shauna Melvin of John L Scott in Puyallup, as well as Lisa Newland from Stewart Title and everyone else who helped make the dream of home ownership possible for this wonderful family!!
Dreams do come true, especially with the right team behind you!
For the past six months, I have been reading a lot about the importance of trust and the profound affect it has on daily life–personally and professionally.
In one article featured on StephenCovey.com, it explains how low trust “has a huge tax associated with it." Some of the main compelling points in the article include that trust is very important in business, and that one cannot conduct business effectively without mutual trust. In fact, the article asserts that trust is vital:
“There are just so many elements to the simplest transaction that require trust. But we are like fish that discover water last and are sometimes unaware of those implicit elements. Trust is the lifeblood of all relationships, of all transactions, and is so foundational and fundamental to everything in life.” (stephencovey.com)
I discovered that I prefer working in an environment where there is genuine trust, mutual respect, and a collaborative team spirit. This also extends to personal life and relationships. With this kind of synergy, people can build meaningful connections and bring the experience of life to a completely new level. Without it, distrust, adversarial interactions, and the speed of accomplishing goals dramatically decreases to the detriment of all involved.
For real estate buyers, working within a culture of high trust can make the difference between working with what Robert Hahn of Inman News calls a "House Hawker," or a "Trusted Advisor." It means the difference between working with a human door opener and a dedicated real estate advocate.
Real estate buyers working with a highly trustworthy agent will benefit greatly from the resulting synergy that develops through dynamic collaboration. Good things can happen faster. When combined with a highly trustworthy mortgage broker, the result is a profoundly effective team and support system for real estate buyers. Such teams can make excellent progress and realize outstanding results over and above what buyers could achieve on their own or in an environment where everyone is in it for himself or herself.
It takes high trust, active listening, mutual respect and understanding, as well as open communication and being receptive to new ideas to realize unparallel results. This is the vision I have for my life personally and in business. I aspire to bringing out the best in others and in every situation. It means being accountable, responsible, caring, while adding value to the lives of others. It also means focusing on relationship building and mutually beneficial partnerships based in the spirit of good character, hard work, and goodwill.
With awareness comes the truth, and with the truth, the right thing to do becomes clear. Trust in ANY relationship whether client, referral partner, friend, or family member, is essential to the health and happiness of the human experience. Therefore, I am committed to building trust with all the relationships in my life. I will not settle for anything less, and I wish the same for you.
Here are some resources and articles on trust and trust building:
What is trust? ( from changingminds.com)
The Speed of Trust: The one thing that changes everything (Stephen M.R. Covey)
More resources, perspectives, books, and articles about Trust