Rule Enforcers vs Rule Breakers; and Florida Real Estate Contracts

I was recently reading an article in a local magazine, that was written by a Little League Baseball Coach. He is a bonafide Rule Enforcer. He knows every rule of the game, and exactly how far they can or cannot be bent. He also knows a couple of common mistakes that are made by other coaches when they get 2 similar rules confused. As I read the article, my mind was comparing his nature, and his experiences, to my own nature and experiences, and how these can apply to the real estate industry as well.

I admit to being a Rule Enforcer. I have absolutely no problem singling out the Rule Breakers, which is probably obvious from my very rare "rant" posts. (Just be glad they're rare =P) But this post is about how as real estate professionals, we have MANY rules and laws that must be followed. And when representing my clients, I use my knowledge of the legalities, the rules, and the REALTOR® Code of Ethics, in a manner that best benefits my clients. (I imagine most of us work in a similar manner; within the means of our own strengths and personalities.)

Again, I'd be remiss if I didn't admit to my love of Rules! I like knowing exactly where the boundaries are. And I like knowing exactly how far a rule can or cannot be bent. (Blatant Honesty Moment: I DO NOT like gray areas, and I don't think much of people who live in the gray areas!) And I Use My Knowledge for the Benefit of My Clients! Yes, I admit to that too. I go out of my way to take the instructional classes at the Daytona Beach REALTOR® Association (available for REALTORS® only - not just real estate licensees) every time the FAR/BAR contracts are changed. I go out of my way to seek out the changes and differences in the Standard FAR/BAR contract vs the "As Is" FAR/BAR contract.

To clear up any confusion here, we have 2 separate contracts instead of just an AS-IS rider. This was changed several years ago, in order to clear up some common legal problems that were occurring due to mis-use, and mis-information when implementing the "As Is" clauses, formerly referred to as the "D' and "N" clauses. Also, so there's no confusion, in our area, the FAR/BAR contract is the one that is expected to be used when presenting an offer; so I'm only addressing the 2 FAR/BAR contracts, rather than the "FAR" contract(s).

I enjoy learning the legalities and reasoning for why certain changes have been made to our FAR/BAR contracts, and how we can protect our real estate clients. (Again, the contracts AND the training classes at the REALTOR® Association are only available to actual REALTORS®, not just those who hold a real estate license.)

I'm now going to show my hand a tiny bit here by pointing out the most common mistakes that I've personally seen, where other REALTORS® misstep on the FAR/BAR contract. And no, I do not point these mistakes out to them when they bring me an offer on one of my real estate listings. I just keep it under my hat, and pull it out if the offer becomes a contract, and the other agent starts dropping the ball on their end. My reasoning? From the very beginning of an offer, I'm focused on the big picture... the long haul... the "what if" of what could happen in the Worst Case Scenario. And I want my clients to be ahead of the ball! It's just good business and BEING a real estate professional.

Now for my tiny tips as I show my hand just a bit ;-)
In the Daytona Beach area, the most common places where mistakes are made in our FAR/BAR real estate contracts are...

1. The "money" section, and how what wording is used, and in what places it is used, when a deposit/good faith money is not collected at the time of the initial offer. Do you use verbiage like "Upon Acceptance" for when the good faith money will be provided by your buyers? Hmm. Maybe you should take that class at your local REALTOR® Association.
2. Writing any type of verbiage that reference clauses that are already detailed in the contract. Why would you do this? Isn't all the necessary verbiage already there? Wasn't that legal verbiage used, based on real estate history and past problems? Isn't that verbiage stated in a manner that's meant to prevent the problems we've had in the past? What are the potential problems that can happen when you add to that verbiage?

OK. So I've just posed 2 problem areas, and several questions. In reading this, do you know WHY the examples I've given might pose a problem? I know this post is open for the whole world to see, and I'm only addressing Florida real estate, but we can still learn from each other. So what are your experiences? How do you handle these areas? Or do you encounter other contractual areas that are a greater problem in your location?

So many questions. So many loopholes and potential pitfalls. What's your take on the rules, laws, and REALTOR® Code of Ethics? Have you been an "unintentional rule breaker"? I'm interested in the thoughts of all of you who work in ANY area of real estate, even if you're not a REALTOR®, and even if you're not in the "sales" part of the industry.

And yes, I'll answer some questions as you comment. I wouldn't want to just leave you all scratching your heads and wondering what the heck my point could be. Just consider this an educational blog post for everyone involved in real estate; even the individual buyers and sellers. =)

Looking forward to your comments!

www.LisaHillRealtor.com

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First Time Home Buyers in Daytona Beach, Port Orange, South Daytona areas...

Daytona Beach, Port Orange, South Daytona Real Estate Blog by Lisa Hill, "The Smart Choice"

Atttention First Time Home Buyers: If there's even a chance that you'll be interested in buying a home in the Daytona Beach area; including Port Orange, South Daytona and all of east Volusia county, DO NOT WAIT any longer! Time is running out, to take advantage of the $8000 tax credit!

Although your mortage MIGHT take only 30 days for full financing, in today's real estate market it is highly unlikely! And to receive the $8000 tax credit, you MUST close on your home by November 30, 2009! If you don't close by the cutoff date, you will not receive the $8,000 tax credit.

If you have not yet started your search for your home, call me ASAP! I'll help you with your search, and work for you in finding just the right home for you, and negotiate to help you get the most house for your money.

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A Behind the Scenes Look at the Business of Real Estate (Pulling Back the Curtain)

As a REALTOR®, it's easy to forget that the public doesn't always know how we get paid and/or how the real estate business works. They don't see what happens behind the curtain. So I'm pulling back the curtain. I believe the consumer might enjoy learning about the hidden part of the real estate transaction, and at times, just how much can be hanging by a thread. Hopefully, you'll enjoy learning about the process behind the process. To keep this as simple as possible, I'll start by stating that REALTORS® are not employees. We're Independent Contractors. We don't get a W-2, with our taxes partially paid by an employer. We get a 1099 and are responsible for ALL of our own taxes and expenses. Think of every REALTOR® as an individual small business owner. Therefore, we have to itemize our taxes, and write off whatever is eligible for claim as a business expense. But those small tax breaks don't add up to much when each and every expense is our own to pay! Now for some specifics... REALTORS® work strictly on a commission basis. We do not get paid until we actually close on a property. And out of each commission, we have to pay for...

• All gas and vehicle mileage incurred by that transaction
• Any "extras" we may have donated to help facilitate the transaction
• The cost of postcards or paper, ink, envelopes, and postage that was needed to promote a listing, or send notification of a sale
• Paper, ink, color copier, (or we can pay someone else for this service) and yard boxes for flyers, if we've provided this service for a real estate seller
• Costs of all advertising for the duration of a listing, which in our current market, could take 2 years. (That's how much inventory we have in our MLS)
• Lockbox, if the brokerage doesn't pay for it, or a different kind of lockbox, as is sometimes needed
• Name riders or personalized signs, if for a listing
• MANY hours of our time

In addition to the costs incurred for an individual sale, there are the things that are needed just to keep our business running smoothly and professionally (some of these are only what I personally consider necessary)...

• REALTORS'® Personal Web Site
• Multiple Blogs
• Errors and Omissions Insurance
• Computers: Desktop and Laptop
• Portable Hard Drive/Memory Stick/Jump Drive
• Cell/Smart Phone with Contact Manager, plenty of minutes, text messaging, and internet capability, so we can provide full-service for our clients
• High Speed Internet Connection
• Additional Phone Lines for fax or DSL
• Cable Modem if DSL is not used
• High Quality Camera for taking quality listing photos, or to take extra photos for buyers and insurance companies
• Video Camera for filming listings
• Photo Editing Software
• Video Editing Software
• Word Processing Software
• Contact Management Software
• Power Point Software for miscellaneous presentations
• Personal Printer/Scanner/Copier/Fax
• Personal Brochure, Business Cards, and other miscellaneous handouts
• Extra Vehicle Insurance, since we use our vehicles for business
• More Gas and Vehicle usage, as we travel to each appointment, even if we don't get the business!
• Personalized Open House signs
• Office Supplies
• (We have to replace these items on our own, as they break or become outdated)
• And let's not forget, a true real estate professional is going to be knowledgeable of any recent changes in real estate laws, and is proficient in the Social Networking of Web 2.0

In addition to all this, REALTORS® pay to be members of their local REALTOR® Association, and for access to the Multiple Listing Service (MLS). Then they have to pay for ALL their own taxes, which are higher due to non-employee status. We also pay for our own health insurance and medical costs. And there are always additional marketing materials that are needed, to keep new business coming in. Let's also not forget that with everything I've listed, there are many, many, many hours of work that is done... all without knowing if the work we're currently doing is going to lead to an eventual sale. And some clients may take years before they buy. I recently sold a house to someone I've been working with for 3 years. In order to bring these types of clients to a successful closing, we have to maintain contact with them, and meet their needs for the entire time, until they buy.

With all that being said, I'll finish this post by stating what I thought would be obvious, but apparently is not. And I'll preface this by saying, the next section is not meant to be rude or offensive. It's just the reality of the situation. So here it is... When a REALTOR® works with a real estate buyer, the REALTOR® expects that buyer to be loyal, and not call other real estate agents. Many times, a buyer can unintentionally, with one phone call, or by stopping by one open house, land in the cross-hairs of another agent who is not ethical enough to ask if that buyer is working with another REALTOR®, and end up negating all of the costs, and hours, and dedication they've been given by the REALTOR® who has been working diligently to help them find that perfect home. Actually, when this happens, their former REALTOR® ends up with less than zero... it's worse than ending up with nothing. It's a deficit of the worst kind. That loss of time, income, and expenses paid, not only amounts to bad business, it also means that all this was taken away from our families who depend on us. It's a loss of our time and expenses that could have been better spent on a client who is loyal. This is why many REALTORS® will require a real estate buyer to sign a buyer/broker real estate agreement.

To elaborate just a bit more, if a real estate buyer is going to call other agents, that buyer's agent is not going to be able to do their best work. If we (REALTORS'®) know our real estate buyer(s) are working only with us to find their next property, we'll go out of our way to find the perfect property; we'll set aside extra time for that buyer; we'll always have the needs of that particular buyer in the back of our minds, even when we're on a non-related appointment. Also, with the Multiple Listing System (MLS), all REALTORS® have access to each others' listings. The agent who is working for a loyal real estate buyer, can setup a customized MLS search for that buyer, and keep them apprised of new listings as they come on the market. It's about going the extra mile for that loyal buyer, and doing what is necessary to meet their needs. It's a win/win relationship.

One last note: With all this information, I didn't even touch on all the details of the individual real estate transactions. I guess that will be a future post.

If you'd like to buy or sell real estate in the Daytona Beach, Port Orange, Ormond Beach and encompassing areas, make a Smart Choice and contact Lisa Hill with Adams Cameron&Co., REALTORS® for all your real estate needs.

REALTOR® Safety Awareness

Daytona Beach Area Real Estate Market, Data and Updates. By Lisa Hill, "THE SMART CHOICE!"

I was recently reminded of an incident that happened to a REALTOR® friend of mine, a few years ago. This incident was the type of horror story we all fear.

My friend received a call from a potential buyer who had to catch a flight out of town later that morning and he needed to leave by 9:00 a.m. He was anxious to see a model in a development my REALTOR® friend was representing and the only time he was available was early in the morning. So my friend scheduled an appointment to meet this potential buyer at one of the models at 7:30 a.m.

When she arrived at the model, the buyer was waiting and they proceeded to go inside the house. A few minutes later, another vehicle arrived with a couple in it. The potential buyer told my REALTOR® friend that these were friends of his and they all proceeded to view the house.

Then they got to the master bedroom. At this point, the original potential buyer pulled a gun out of a briefcase, then used garbage bag ties on my REALTOR® friend, and put her in the closet of the master bedroom. Now while my friend was in the closet, she could hear the 3 people rummaging through the house and talking on what sounded like walkie talkies, but she couldn't understand what they were saying, nor could she understand what they wanted in a model home.

Meanwhile, she could see into the master bathroom from her position in the bedroom closet, through the space where the criminals had left the door open a crack. She kept an eye on the mirror in the master bathroom, which was reflecting the criminal's positions outside the master bedroom. She managed to get the ties off her feet, then summoned her courage and ran out the back sliding glass doors to a neighbors house and called the police.

The criminals left before the police arrived and they never could figure out what the overall plan was, but it was obvious that these criminals were professionals and there were others close by.

I titled this post that buyers needed to read this too, for an important reason. If you're a real estate buyer, you need to understand why your REALTOR® expects you to do things a certain way. For our safety we need you, as a real estate buyer to...

1. Meet us at our office, not at the house you want to see.
2. Take time to sit down with us to give us all time to get comfortable with each other, as well as to help us understand your real estate preferences.
3. Let us make a copy of your driver's license and leave copies with our office personnel.
4. Stick to a schedule, so we can leave a definitive itinerary with our office personnel.
5. Completely fill in all the fields on the forms at an open house. You may think looking at open houses is a fun afternoon outing, but we honestly need to be sensitive to the safety of the seller's possessions, and our lives.
   

Real estate buyers, we understand that you're anxious to start looking at the houses or condos you want to see. But I'm sure you'll agree with me that the safety of the agent is of utmost importance, and you can probably wait just one more hour. Please be understanding of this and cooperate with any requests your agent may make. The story I've just told had a happy ending, as this agent was able to return safely home to her family and continue a successful career, albeit more than a little bit reluctant to return to work. But there have been many others who were not so lucky. Just read Elizabeth Nieves' recent post about Sarah Anne Walker; a REALTOR® who was brutally murdered while holding open a model home in 2006.

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Want to Sell Your House? Price it Right!

Daytona Beach Area Real Estate Market, Data and Updates. By Lisa Hill, "THE SMART CHOICE!"

As a REALTOR®, I frequently have the unpleasant job of having to provide information to real estate buyers and/or sellers that is not what they want to hear. It seems that lately I've had this happen more than usual. Now I admit, I work primarily with real estate sellers. And of course I work with the buyers for my listings. I find these buyers through my marketing plan. But I don't generally work as a buyer's agent. Although, Florida law now instructs all real estate buyers and sellers to automatically assume that the agent they contact is operating as a Transaction Broker, unless the agent indicates otherwise. So Florida law allows for real estate agents to transition between real estate buyers and sellers with ease.

In the last couple of weeks, I've had a couple of listing appointments for houses owned by potential real estate sellers who want way too much money for their houses... in other words, listings I don't want in my inventory. I've turned down these listings.

Before I continue, I feel this must be said...

• When a real estate professional does a CMA (Current Market Analysis), it's strictly professional. It's why REALTORS® serve a purpose. We're not emotional about the transaction, whereas buyers and sellers are usually pretty emotional about their "home". I bring this up because of a comment that was recently made on one of my listing appointments. After being presented with the facts (recent sales data), the home owners said "We're getting screwed". (Yes, one actually said that.) You can't be getting "screwed" (so eloquent) when it's just the current market value. You're being given facts... data... numbers. How can you take that personally? And real estate is cyclical. It always has been, and always will be. We have no control over the current market value. A REALTORS'® job is to facilitate the transaction by keeping it strictly business, and lessening the emotions. It's the only way to get the best "deal" for both parties. This brings me to my next point.
• How is it that home owner(s) can reject the factual evidence of value, and start listing everything they've done to the house since the day they bought it... as if the other recent sales didn't have the same, or similar maintenance over the years. But let's proceed with addressing the way to properly price real estate in todays' buyers' market.

Now for the way I prepare for a listing appointment

It's impossible to provide an accurate market analysis for a house, condo, or townhouse without actually seeing the property with my own eyes. But I can get the basic data prepared by looking at what's currently on the market (most are priced too high), and checking what has recently sold (sales are the accurate depiction of the true market value for a particular property).

Once I've done my research (which usually takes a couple of hours, during which time I don't know if I'll even want the listing yet), I then meet with the potential sellers. Upon meeting the sellers, I first have them give me a full tour of the potential listing, and tell me about any upgrades they've made. When the tour is completed and I've documented all the details, I then present the home owner(s) with the recent sales that are comparable to their property, and are located either within the same subdivision, or within a 2 mile radius (keeping the process as similar as possible to the way an appraiser would work). Last but not least, we fine tune the additions and subtractions, based on the condition, location, and amenities of the subject property in relation to the comparable sales and the upgrades, or lack thereof. (Asking prices of active listings are mostly irrelevant, except to be sure the new listing is properly priced.)

But after all that, we're still not finished. Properly pricing a property for sale requires more than just facts and figures. It even requires more than comparing the subject property (potential listing) to the recently sold listings. And it even goes beyond the condition of the property. There are actually several more conditions to consider. But for the purposes of this blog post, we'll only address one more step, which is; determining the sellers' motivation level. If the seller(s) need to move fast, then obviously, they'll want to price their house/condo/townhouse below the competition so it will sell as quickly as possible. If the sellers are not in a big hurry, the listing still needs to be priced competitively (since we're still in a buyers' market), but it doesn't need to be at a rock bottom price (other special factors not withstanding). *Side note: Viewing the property, determining need, considering location, observing the condition, discussing all options, etc., takes another couple of hours during which time I/we still haven't decided if I'm going to list the property.

To go back to my recent listing appointment, I provided them with a range for what they could expect as their sale price. But these sellers wanted to net about $75,000 more than the market value of their home. It was a listing I could not sell, so I wasn't willing to list it. There were no comps to show a higher value, and even with a complete overhaul, the property would not be worth anything close to what the home owners wanted to net. That particular neighborhood just will not draw a price that high. If a potential buyer could pay what these sellers wanted, the buyer could find a nicer house, AND a nicer neighborhood. It's not an insult to this house or neighborhood. These are just the facts... the numbers... the data. Remember? Your REALTOR® is there to provide you with this information, and facilitate the transaction by lessening the emotion. This helps both parties get a better "deal" by keeping communication open.

Lastly, this is something all real estate sellers need to know. In the last couple of years, about 99% of all buyers I've worked with, have only been interested in getting the best house for the cheapest price. Nobody can afford to overpay. And the banks won't finance a property that THEY feel is over-valued. And until the market has completely stabilized, this will continue to be a legitimate concern for the banks and the real estate buyers. This is why over the last couple of years, when I have been able to get my buyers to take a look at an average priced property, they wouldn't even consider making an offer unless the seller(s) were willing to drastically reduce their asking price. Real estate buyers have not been willing to settle for anything less... or should I say, they won't settle for anything more?

So I'll finish this post the way I titled it. If you want to sell your house, price it right! When a professional REALTOR® presents you with factual data that indicates a lower value for your property, it's not personal. As a REALTOR®, I only get paid when I actually close on a transaction. I really want to sell your house. And it's my job to know the real estate climate, and to be honest with my potential clients. To do otherwise would not only be a disservice to you, it's also a violation of the REALTOR® Code of Ethics. So if you want to sell your house, make sure you work with a REALTOR® you can trust, and try not to take the data personally. They're probably doing their best to give you accurate information.

I just sold one of my listings. So if you need a REALTOR® with the knowledge and resources to sell your house, condo, townhouse, or vacant land, and would like a free market analysis, make a Smart Choice and contact Lisa Hill with Adams Cameron & Co., REALTORS®.

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