I wish I could be this petty and still pocket $150,000 commissions…. oh the life….

Usually I like to rip on the real estate industry. After all, we are an easy target. With our ridiculous self portraits frozen in time from 1987 and our shady slogans like “I’ll sell your house in 30 days, or I’ll buy it!” the real estate industry might as well have a “kick me” sign on it’s back. But today will be different my friends. Today, Blue Collar Agents, a blog about consumer focused real estate, is going to rip on real estate consumers. So, if you are a real estate consumer, sit down, compose yourself, and get ready for some constructive criticism. It will be good for you, I promise.

My boss, on 60 Minutes, said that the real estate industry is the most screwed up industry in America. I actually think its probably the second most screwed up industry in America. I think the health insurance industry is actually the most screwed up. Think about it. You’re a health conscience person. You eat celery and drink cod liver oil and spin every morning. You don’t drink, you don’t chew, and you don’t go with girls that do. And yet, somehow, you are getting charged the same amount for your health insurance as the guy on supersize me or the person who drinks margaritas at open houses every weekend. This is screwed up. And this is why I need to take a moment to ream real estate consumers (in the spirit of love of course).

Dear Real Estate Consumer,

Part of the reason real estate commissions are as high as they are is your fault.

Lovingly,
Trevor Smith 

Just like health insurance rates are through the roof partially because of folks who choose not to take care of their body, real estate commissions are through the roof because of people who drain the time of real estate agents. Allow me to elaborate.

• Consumer A (CA) educates himself on the real estate process. He goes to his local lender to get pre-approved for a loan. He researches homes online. When he is ready to go looking at homes, he calls his local traditional agent (TA). Along with the homes that CA finds online, TA finds a few of her own, and they head out house hunting. This process goes on for about a month, and together CA and TA look at about 8 homes together. They settle on a cute little fixer upper on the west side, make an offer on it that is about 3-4% below list price (because the home was already fairly reasonably priced), do some negotiations, and win the home. The home closes 30 days later, and TA pockets a 3% commission.
• Consumer B contacts the same Traditional Agent to tell her she wants to buy a home. CB isn’t sure about her budget, and hasn’t been pre-approved.  TA happily recommends a few lenders, and after some “creative financing” CB gets pre-approved. CB also isn’t sure what part of town she wants to buy in, so CB and TA have a couple of appointments where they narrow down CB’s criteria for a home. After she decides she wants to live in the North End, CB and TA go out house-hunting. After 5 home tours, CB finds the house of her dreams. She asks TA to make an offer 17% below list price. TA trys to counsel her otherwise, but can’t convince CB to make a higher initial offer. They make their offer and the seller refuses to respond, or even reingage in negotiations. TA and CB begin their house hunt again. They tour 11 more homes over the next 2 months. Finally, she finds a home that she loves and is already reasonably priced. She makes an offer 4% below list price, and after negotiations settles at 3% below list price. “Woo hoo!” thinks TA, “We finally got under contract.” However, during the inspection period, CB gets cold feet and decides to use her inspection contingency to back out of the deal.  Once again, no house for CB and no commission for TA. TA and CB do this same scenario again on 2 other homes. Make an offer, CB backs out after getting cold feet. Eventually CB decides that she doesn’t want to purchase a home, and instead rents a place from her uncle. TA gets paid nothing. 

These scenarios happen all the time, and unfortunately, Consumer A, who thought out his home buying process, did his homework, and made reasoned offers, had to pay a higher commission than he ought to have because the traditional agent had to make up for her loss on Consumer B. It’s just like health insurance - the celery eaters pay for the Big Mac eaters.

But here is what really saddens me: Until real estate consumers are willing to pay upfront for the services of a real estate agent, this will never change. Responsible consumers will keep on paying for the real estate services of irresponsible consumers. I guess in the end, maybe we kind of like it that way. After all, we never know when we might want to act like Consumer B.

My brother sells Margarita Machines for a living. Well, they’re really slushee machines that we put Jose Cuervo and Margarita mix in. Nonetheless, they rock. Whenever I am partaking of an icy beverage, I think to myself, “wouldn’t this refreshing concoction make a beautiful addition to a sunny Saturday afternoon open house.” But then I remember - I live in the no fun zone. You see, in Seattle, our MLS has instituted Prohibition at open houses. Alcohol = MLS Fine.

So, NWMLS, here are 5 good reasons you should let people crack a cold one at open houses:

• It’s the seller’s home. Let them serve alcohol to their guests if they want to.
• What better way for a buyer to picture themselves living in your home then to let them gulp a Pabst Blue Ribbon while sitting on your couch and watching the Hawks on your plasma TV?
• Finding out the personality of your potential buyer or seller by observing what they drink could help with negotiations.

A BBC Poll says you can tell a lot about a person by their drink of choice:

Red wine - mature in outlook, discerning and organised
Vodka or white wine - entrepreneurial spirit, like being in charge
Tequila - extrovert, free spirits, live for today
Gin - crave comfort and security
Lager or bitter - experimental and creative

• Nothing says “tell me your bottom line price” like a couple of glasses of Franzia
• Let’s face it, agents get bored at open houses.

Ok, well these might not be that great of reasons….but aren’t we all big boys and girls here? Can’t a seller and their listing agent sit down and determine if alcohol is appropriate for their open house? Do we seriously need another real estate organization telling us how to sell our own home?

Angelo Mozillo, chairman of Countrywide, called a customer seeking loan modification “disgusting,” when he accidentally replied to his email rather than forwarding it to his staff. The customer had gotten Mozillo’s email address off of Loan Safe (a forum I blogged about earlier), and then used one of the Forum’s templates to request the modification. 

View the entire text of the email.

See it in the LA Times and USA Today.

If you do not have Xobni, you must get it. I could give an elaborate dissertation on how amazing it is; however downloading it says it all. Your email will never be the same.

This quoted paragraph was part of an article I recently read from a Las Vegas Real Estate Agent and the following was my response: 

“Many Las Vegas Discount Realtors, not all of them, just place their listings in Multiple Listing Service and wait for another Las Vegas Real Estate Agent to bring them a buyer.”

Let the games begin!

Most agents, period, place their listings in the MLS and wait. Why? Inherent laziness. Lack of experience. THIS IS NOT THEIR FULL TIME JOB! And given time, I could come up with a few more reasons.

There is a Hybrid.

When I became a Realtor 3 years ago I wanted to offer homeowners an alternative. I wanted to separate myself from the pack. I was so proud to become a Realtor. I started offering Las Vegas discount realty services because it allowed me to work in volume. This gave me massive experience as I learned to work one transaction after another. Referrals would fly in. As good as I consider myself on the phone, I still prefer a referral to a cold call. Who wouldn’t?

Because of my conscience, I could never give my clients discounted service. It was my choice, not my clients, that I became a discount Realtor. They deserved no less than the best I could offer. With this thinking, combined with Internet marketing, I listed 125 homes my first full year in business and sold 50 of those.

64 of the former were a direct result of Internet marketing. 17 of the latter…Internet marketing.

What can be said about MOST discount Realtors can be said about MOST full service Realtors. I have heard countless times from prospective clients, “My last (full service) Realtor said they were marketing my home but when I asked them to show me where and how I was told, ‘Oh, in different places.’ or ‘Well, we market all over but we really can’t share that information because of competition.’ (Bull$*it)

I tell my clients to Google me before they ever hire me. I want them to be overwhelmed with the amount of marketing they can expect to get when they hire me. They Google: “Richard Brain” las vegas

Make sure the quotations are around my name only as shown. I appear on the first page of major search engines multiple times (3-7) for multiple keyword phrases.

OK, enough of my shameless plug.

I not only offer full service at a discounted price, I stay in communication with my clients weekly. I ask for referrals every chance I get. I follow up on showings and provide that information to my clients in the back office of the individual property Website that I build for my clients. Staying in communication with my clients is more than a lot of full service Realtors do. What? Am I lying? Am I just making this up? My clients feel like winners because they know they made the right choice in hiring me to preserve their equity.

What’s in it for me?

My clients have no problem using me to purchase their next home. I helped them to make a bigger down payment. More of my clients are able to qualify. Even if they move out of state they trust me to refer them to an agent at their destination.

It’s all about buyer leads!

We all know this to be true, or should. I’ve had as many as 64 active listings at one time. How many buyer leads do you think that generates? In one weekend I received over 100 calls. I even taught, for a fee, I’m no idiot and I’m not leaving money on the table, a well known full service real estate company from San Diego to do what I’m doing. 16 days after our meeting I received a voice message telling me they had locked up 50 to 70 thousand dollars in buyer contracts based on the information I provided them.

Oh, and I don’t care if anyone believes it or not. I got paid $1,500 for 6 hours of my knowledge and I can prove it.

In conclusion.

I agreed with the article whole heartedly for the most part. It is this general consensus of discount Realtors that I look to exploit. Everyone that survives in this industry has a niche or business model. I have mine and it works for my clients. When every other agent in town is promoting how good they are and why they are the best I take a back seat. I promote my clients property. I get their property sold. Guess what happens next? My clients promote me. So I got what everyone else was after to begin with but mine is stronger because it’s a third party referral. I don’t self promote.

Thank you for your article and thank you to all that take their time to read this. I hope this was helpful. I hope someone out there got a new perspective. There’s enough business out there for all of us. Just try to do it the right way.

To all our continued success! God bless.

I want to extend an overdue welcome to Blue Collar Agent’s new friend and co-author Richard Brain. Richard joins us from the steaming hot Las Vegas real estate market (or is that a steaming hot foreclosure market? I sometimes get those mixed up. wink. wink.). He is the founder and owner of exposemyhome.com

Richard first caught my attention with his comment on my hobbit furniture post:  

Next thing you know the builder will be making the toilet seats smaller so he’ll feel more endowed.

I thought to myself, “This guy has the sense of humor and hutspa (sp?) to be an awesome blogger.”

…. and as you can tell by his first post, he’s an awesome blogger indeed. Welcome aboard Richard. I look forward to reading your many posts to come.

Read Richard’s Bio.

This is my debut article on BCA.  I’m very happy to be here and I’d like to thank Trevor Smith for accepting my offer to be an author. 

I was recently asked what I would consider a strong Internet presence. 

The following was my response:

I remember reading in Napoleon Hills classic, Think and Grow Rich, that when Henry Ford was on trial, having only, if I remember correctly, an eighth grade education, he was asked how it was possible that with such a lack of education it was possible that he had the competence to run a business as vast and complex as building automobiles.

His response was priceless. “I don’t have to know about this aspect or that. I have 11 buttons at my disposal. When I want a chemist, I push a button. When I want a metallurgist, I push yet another button. The key to my success is not that I know everything but that I know how to surround myself with those that know what I want to accomplish. (Key Alliances).” Or something along those lines.

The judge threw the case out citing that only a man of competence could have responded in such a manner.

My point is this. You don’t have to be #1 on page 1 of search engine results. Nearly 70% of consumers do business with companies on the first page.  Get it?  First page.

There are 10 possible chances to be on the first page. I’d rather my Las Vegas discount realty services appear five times on the first page through alliances then be #1. I have more chances of being found.

I test keywords. I see who placed on the first page then I find a way to align myself with as many of those as possible. I try creating reciprocating links with the owners of those elite sites. However, that’s not always possible.

My next step, I look for a way to participate in one of those elite sites; the first pagers.  That’s how I found BCA.

I comment on blogs.  This creates back links.  I look for a way to be added to their site.

I create blogs. I provide information and try to sell no one.

A strong Internet presence to me is all about pushing buttons and aligning myself with the ones that already know what I want to accomplish; to be on page one.

Recently Redfin limited the types of short sales they service. To some this may seem “anti-consumer” in that we are limiting the choices of what our customers can make an offer on. However, I believe this is the most pro-consumer thing Redfin has done since rebating 2/3rds of its Buyer’s Agent Commission.

Here’s why: By making an offer on a short sale property there is a very large chance that you are offering to buy real estate that isn’t really for sale.

Let me elaborate:

I assisted clients with making offers on approximately 10-13 short sales over the last 9 months. Out of those transactions, all of them were accepted by the seller, but only 1 closed. Given this success rate, I should either be fired instantly or there is a fundamental problem with short sale listings.

Here is what I believe is wrong with short sales:

• Most short sales are signed around instantly by the seller, giving the buyer false hope that the transaction has a high chance of success. In reality, most sellers who are in short sale will sign any offer they receive.
• Most short sales have two lien holders on the property.  While the first lien holder generally approves the short sale within 3-6 weeks, the second lienholder will often sit on the contract for months at a time. Why? A second lien holder has the most to lose in both a short sale and foreclosure auction. In essence, they will get little to nothing. However by stalling a short sale, they can postpone the first lienholder from foreclosing on the property while simultaneously using their debt collection goons to scare money out of the home owner.
• Most MLS’s do not have clear guidelines on how a short sale transaction should proceed.  Many thanks and blessings upon Jeff Coop and NWMLS for giving us a form to clarify these issues; however most MLS’s are not clear how transactions involving a short sale should handle earnest money, inspection timeframes, appraisals, etc. There are times when buyers will deposit $5000 - $10,000 Earnest Money, spend $400 on an inspection, and $450 on an appraisal, only to find out that the bank had no plan to even consider an offer at the seller’s list price.
• Most agents don’t file their Hardship package, BPO (Broker’s Opinion of Value), and Estimated HUD before listing a short sale. These things are absolutely mandatory for a loss mitigation department to consider a short sale; however most listing agents do not file these things until after they receive an offer on the property. One of the easiest short sale transactions I ever did was because the listing agent had taken the time to file these documents beforehand, and had actually gotten the list price pre-approved prior to listing the short sale! We closed in 30 days.
• Most buyers have misconceptions about what is involved with purchasing a short sale. At the start of the transaction, a short sale seems like a dream come true. “I will by this house at a firesale price and have instant equity as soon as I move in,” many buyers say.  In reality, short sales generally take 3-6 months to complete, during which time buyers are left in a limbo-land about their real estate future. Many times agents will go for weeks or even months with no communication at all from the banks. In the meantime, interest rates change, other potential properties come and go, and the buyer becomes frustrated with the entire process.
• Buyer’s have no control over whether their transaction closes.  There are few times that a home buyer will feel more out of control then during the purchase of a short sale. A bank will not talk to a buyer about the progress of approval. The bank won’t even talk to the buyer’s agent about the status of approval. And in some rare cases, the bank won’t even talk to the listing agent about the status of approval. This means that the only thing a buyer can do is sit and wait…. and wait…. and wait, while their home purchase is decided by someone who is 4-5 people removed from them.
• Many homes in short sale have other liens and judgements attached, including back child support, mechanics liens, court judgments, and the like. If the seller can’t pay their mortgage, they likely can’t pay these. If this is the case, one of two things has to happen: 1.) the buyer pays the judgments/liens, or 2.) They have to be negotiated along with the mortgages to be removed or reduced.
• Most Short Sales simply don’t close. Although there is no way to get complete data from my MLS (homes are just noted as short-sales in the agent-only remarks, there is no data field for them), I have done some unscientific study of the closing rate in the Seattle Area (King County, Pierce County, and Snohomish County). Here is what I found:
  • There are appx 989 short sales on the market
  • In the last 6 months appx 351 short sales have closed
  • In the last 6 months appx 692 short sales have expired or were cancelled
  • There are appx 524 short sales that are currently subject to inspection or pending (i.e. waiting on lien holder approval)
  • Assuming that 1/4th of the STI or Pending short sales close (which I think is generous), and that 1/4th of the expired or cancelled short sales relisted, it appears that about 23% of homes that are listed as short sales in the Seattle area actually close.

Once again, this is an unscientific study run on a Saturday morning in my pajamas - but you get the point: If you write 4-5 offers on a short sale, you get might get 1 of them to stick. Here’s the rub: If it takes about 3-6 months for each offer to be accepted or rejected, it could take a home buyer up to 2 1/2 years before they can get a short sale to actually close! Do you know anyone who is willing to wait that long?

Given these issues (and probably many others), Redfin has limited the short sales they service to those with the highest chance of success. Successful short sales tend to have all of the below qualifications:

• Homes with only one lien holder (mortgage)
• Homes in which the hardship package has been filed by the seller/listing agent
• Homes in which the listing agent has had experience with short sales
• Homes with no other liens or judgments other than the mortgage

Once again, I wholeheartedly think this policy does right by our customers - because like most agents, we want to help our buyers purchase homes that are actually for sale - not homes with just a yard sign in the front yard.

For real estate agents negotiating a short sale, or assisting someone with a forbearance or loan modification, I have found the website of all websites for info on cutting through the red tape and getting things done at a Bank’s Loss Mitigation Department.

The website’s name is LoanSafe.org and the people there don’t mess around. For instance:

Not getting help at Countrywide’s Home Retention Department? Just email Angelo Mozilo (CEO), Chris Oltmann, and David Bigelow - their email addresses are posted right here.  Oh - and I almost forgot - CC The Vice President of the United States, the Treasury Department, Dateline NBC, NBC Nightly News, Newsweek, and the Today show.  Two people on the forum did it and had executives working on their loan modification or forbearance with in a few hours.  Like I said, these folks don’t mess around.

Oh  - and do you keep getting the run around through automated systems when you try to call the loss mitigation department? Try these numbers - they’re the direct lines for LM Departments for every major bank in the U.S.

Or - have you been told that you can’t get a loan modification because you’re not behind on payments? Shannon did it, and got her loan modified to a 5.7% fixed rate for 5 years without damaging her credit one bit.

They also walk borrowers through the RESPA laws regarding what kind of complaints banks are obligated to respond to by law.

Many thanks to Moe Bedard for a great Forum - keep up the good work advocating for consumers. 

On an unrelated note: if you’re looking for a job as the Vice President of a Home Retention Department, Countrywide is hiring. I wonder if they include combat benefits in the salary?

Bonus: Check out what this San Francisco Agent did to get one of his listings sold.