Contract Diligence - Part 1

One of the goals of a real estate agent (or at least it should be) is to always complete clear and competent contracts so that everyone involved has both a smooth & pleasant experience - well, at least as much of one as is reasonably possible!

Understanding that if we do not have "excellent" contracts, we cannot make an "excellent" living is one thing. But, more importantly for our consumers, if we have careless, sloppy contracts, we can harm them...and ourselves in the process! The truth is that your license, and really, at some level, your reputation, are on the line every time you prepare a contract. So - keep your real estate license unblemished and your good name by treating everyone fairly, researching the property, and by disclosing any and all pertinent (material) information to all concerned parties.

Integrating the following practices in your contract processes increases the likelihood of doing a great job for yourself & all persons who are part of the process!

ADDENDA - Addendum means “something added”. Addendum are simply documents used when additional space is needed to add to or remove something to any document, be it a listing agreement, a purchase offer or a contract that has already been accepted. You do not need to use an official Arizona Association of Realtors “AAR” Addendum (or Counter Offer) form to have a valid one. Use this when appropriate - many times we see an Addenda used when a Counter Offer should have been & vice verse.

COUNTER OFFERS - Counter Offers "Counter(s)" are used when most of the terms of the contract are agreed upon by both parties, EXCEPT for one to several points. Only once all of the terms (and Counters, if any) are agreed to in writing is there a binding contract. To create a Counter is to create a new offer. If there is more than one Counter, the second (and betond) should incorporate all of the acceptable terms of the first Counter & any additional terms needed, with language such as “All other terms & conditions remain the same”. This way you will have only one final counter form signed. There is a reason in our electronic documents, called "Zipforms", that the Counters are not numbered any higher than 5, being this: if it goes beyond the 5th Counter, it is often best to go back & effectively start over,"re-draw" it all up as it were brand new - on a “fresh-from-scratch” resale purchase contract. If you don’t do this, it can easily lead to more confusion than there might otherwise be.

DATES AND TIMES - Dates should be written out with the name of the month to avoid confusion. A date written as 11-2-09 can be seen as either November 2nd, 2009 or as February 11th, 2009. Most (if not all) of the AAR designed forms we use are already designed to clarify this, but when you are using a document that does not, be clear as to what is meant. And when writing times, such as a time for acceptance, always add the proper time zone if it is not already stated on the document as most of the AAR ones are. This will avoid any confusion concerning the actual times used. Remember - here in most parts of Arizona, we are on "Arizona time", as we do not participate in Daylight Savings, witnessed by most of the rest of the USA "falling back" one hour this past weekend!

DUE DILIGENCE - If you are diligent, you cannot be negligent. Employ competence with reasonable skill and care when preparing contracts and addenda so that the interest of all parties will be treated with fairness and honestly, knowing that full diligence is a duty you owe to all of your clients.

HOME WARRANTY - Offer a home warranty program to buyers (and sellers!), explaining the benefits and costs. The AAR Resale Purchase Contract specifically gives and asks for information on this topic. There are a whole host of competing plans to choose from; maybe offer consumers three to select from...and like an independent home inspection, it is highly recommended that there be a home warranty on EVERY closed transaction!

I'll continue in this vein in a new post (Part 2) later this month!

Understanding The Showings-to-Home-Pricing Dynamic

Now that two of my properties are to be listed for sale, I need to be more conscious of this than ever...and so will you &/or your seller clients the next time you are looking at pricing issues!

Know this...

1. If the house is not being shown at all, it usually means the buyers & agents think the asking price is too high for the house & neighborhood. Recommendation: A major price adjustment.

2. If the house is being shown, but infrequently at best, and/or you not getting any offers during the 1st two weeks, and most certainly no later than the 1st month, it more often than not means buyers are finding nicer homes for the same or less money. Recommendation: A moderate price adjustment.

3. If the house was one that agents say was seriously considered by the buyer, but the buyers end up purchasing something else, &/or if the buyers view the house a second time, but still end up buying something else, it means that the current price is probably closer to what it will sell for. Recommendation: A minor price adjustment.

This information is culled from a National Association of REALTORS "NAR" study. It did not (nor any other research that I am aware of) however define what a minor, moderate or major price reduction is... but in my experience & professional opinion they should be considered as such:

Minor - 1-5%
Moderate - 6-10%
Major - 11%+

Additionally in this report prepared by the NAR, it stated that if a "typical" house (one at or near the median price for the area) listed for sale is priced correctly, it should, on average, be getting at least 1 written offer from every 6 showings. The NAR study also finds that, also on average, a property for sale should be getting 2 showings a week.

So, if you are not getting to these numbers listed above, you of course can always look at waiting longer, and/or at doing more marketing, but the harsh reality is that what is probably needed is a price adjustment; most likely a moderate to major one!

Avoid what I call "Death by a Thou$and Price Cuts"; meaning many too small price reductions too infrequently done...resulting in these most unfortunate outcomes: 1., not accomplishing the objective of a sale at all, or 2., to dramatically delay a realistic time frame for it to occur, and/or 3., end up selling for much less than you likely would have been able to if you had simply priced it right at or near the beginning...by PRICING IT CORRECTLY NOW!

In closing, remember these two key concepts:

1. All you are doing when you select the asking price on a house is "How long will it take to sell?",

and

2. There is nothing wrong with any home listed, not selling, that a proper price reduction won't cure!

WHICH PROFILE DESCRIBES YOUR BUYER?

Savvy sellers hire listing agents who already have a sense of the profile of the most likely buyer for the property. Marketers of all types of products and services do something similar.

In residential real estate, home builders, in particular, often have dozens of different defined market niches of prospective purchasers that they then typically select 2-3 from when deciding what to build and who to promote the new construction product to.

In residential resale, start with these five basic ones below.

Once you identify which one or two categories is most likely, you can then better determine how to market the listing!

5 Buyer Profile Categories:

What they often want; important issues that are things to emphasize in your ads and showings:

1. First Timer's -
“A house like Mom’s”
Low Cash Down
Credit Issues o.k.
Affordable $ payment per month – lowest possible
The feeling of "Security"
Many Community Amenities.

2. First Move Up -
Newer "Everything"
"Good" schools
“A real house this time”
Size; more space inside & out–
Corner Lot, cul-de-sac’s, more yard
At least 2, possibly 3+, car garage

3. Second & Third Move Up -
The "Dream Home"
Quality (The higher-end, the better)
Designer brand names
Even more exclusive schools
Pool w/ luxury features
Status, prestige, exclusivity

4. Empty Nester -
Low or no maintenance
Service-orientated area
No kids bedrooms
Downsize, but in place
Smaller space-but keep stuff

5. Retired -
Single Level Home
Open Floor Plans
Extra energy efficient
Want easy access to close by eating, shopping, medical service
Reputation of area must be good
Smaller yard maintained by HOA.

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While these tend to contain many generalizations, there is more truth in most of that than not. Target the buyer and thus you're more likely to get the target price & time frame for a sale!

A “Backup Agent” Is A Must When You Aren’t Available!

Few things are more annoying to fellow real estate agents and the public than licensees who do not seemingly ever answer their phone & maybe even worse, such as those agents who rarely even return voicemail left for them.

The "good" agents do answer their phone with regularity and actually get back to people when messaged; be it by phone or text. But what about when even those "good" agents will be away (unavailable) for one reason or another? What must they (you?) do about handling potential inquiries for you when you won’t personally be there to take care of your real estate matters?

Quick answer - Appoint another agent! A so-called "backup agent".

This really needs to be required for any absence of more than one day - even you’re accessible by mobile phone! Just because you can answer your cell most anyplace doesn't mean that you can, in all circumstances, work on what is required if you are not physically nearby or available. SOME things CANNOT - even today in our technologically advanced world - be done without you being there!

You truly need to make detailed arrangements with a backup agent before you are “off”– I say 24 hours or longer...but if busier, less than that – for any reason, be it just some quiet time, heading out on a trip or taking vacation! This is even more true on a on-going basis for "dual-careerists", (sometimes called "part-timers", etc.) - those Realtors, who regardless of the identifying label, have limited availability most of the time, not just from time-to-time!

So who is a good backup agent in your absence? Well, the right Realtor will be another agent at your company (yes, it should be a real estate licensee with your current brokerage, not one at a different firm); an agent who can take inquiries from anyone who wants to contact you regarding real estate. This should be a Realtor who is prepared to be familiar with any listings you have and is hopefully as motivated to do as good of a job as you - irrespective of what they are called on to do!

More often than not it is best that you must let the designated broker (or one or more of their duly-appointed representatives) and those who answer your phones (i.e. a primary receptionist) know who will be handling your business in your absence. In practice, that means that if any inquiry is made for something connected to you (e.g. someone decides to call, email, fax, etc. you or wants to see, buy or list a property before you return), the backup agent needs to be aware of all your listings and sales you have in escrow.

Certainly any failure on your part to safeguard your clients’ interests when you go away is a violation of your fiduciary responsibility and may result in you not getting paid all of the commissions you thought you would be receiving. Your broker(s) are there to help you, but not to take your place. It's simply unfair to impose on them, expecting them to do more for no extra income!

Know too that if you have hired a specialized "open transaction coordinator", be it a virtual one or otherwise, this someone who is not a full-charge & tasked personal assistant to you; that s/he is only there to take care of some of the details on your in-process sales, not to be all things to all persons when you are not fully available.

Again - who could this "backup" person be then? Let us begin with the fact that the (or one of the) most common ways is probably that agents often "team up" to cover for each other. This means when you won’t be available, another agent of your choice will serve as your backup. And when that agent is unavailable, you agree to take care of his/her business. No change in compensation is offered or exchanged. Agents who have a reciprocal relationship may be motivated to help each other simply because such mutual back-scratching is in their interest.

But a more powerful incentive for a backup agent is to get a piece of the commission that comes with the required work. Again, you need to reach such an agreement in writing with your backup agent before you take some time away & submit this form to the office. Such agreements are typically available from your brokerage, some even showing various options to payments between the agents depending on what services are performed by the backup agent in your absence and vice verse.

In summary, it's an old joke in our business that "If things have slowed down, take some time off; it will suddenly get busy!" And just because you say " I have nothing going on - I don't have any listings or active buyers!"...believe me - as soon as you are not available, an inquiry will come in for you - often from a source you would least suspect!

Please help us all in the industry collectively - and aid the consumer to minimizing their frustration- complete the following (or something similar) before you become temporarily unavailable!

SAMPLE FORM(AT) - ASK YOUR BROKERAGE IF THEY HAVE ONE SPECIFIC TO YOUR FIRM:

Print Agent Name ___________________________________

I will be gone from _____________ to _________________.

Any real estate related business for me will be handled by ________________________________________________

They can best be reached at this phone # & email _____-______-________ /______________________

In case of emergency, you may reach me at _________________________________________________

Special Instructions ________________________________

*PLEASE NOTE: It is the Sales Associate’s responsibility to notify their r.e. brokerage to cancel these instructions, or if plans change, if applicable, upon your return or modification of the original arrangement.

Real Estate is as Easy as 1-2-3

If you decide to read Bob Boog's book, "Selling Homes 1-2-3" (subtitled "Insider Advice on Becoming a Surprisingly Better Part-Time or Full-Time Agent"), you will easily gain a wealth of new information on the processes that could very well increase your job satisfaction and your income.

The essence of brilliance is to take the complex and make it simple (to perhaps poorly paraphrase Albert Einstein) and Bob Boog does that in this excellent book. By the way, is "Bob Boog" a cool name or what?!

We in the industry have made this business much more complicated than it really needs to be. For all of the changes in the profession, it still, at its core, remains very much the same as it was when my dad obtained his real estate license - 1966 - also the year I was born. Selling Homes 1-2-3 cuts away the complexities we've collectively laid over it all for too long now and makes it much more simple for everyone involved. It also contains many quality sales approaches and techniques for agents that I've never seen or heard of in any real estate training tool - be it a book or otherwise. And I have seen most all of them!

The book has a heavy emphasis on working with buyers, which is relatively rare in a residential sales agent book. In the spirit of conventional wisdom in the business, most books of this type overly favor discussing working with sellers; getting listings. While there is a lot to be said for classic statements such as "If you're going to last, you better list", "Listings are the name of the game" and my favorite, "Old Realtors don't die, they just become listless", many agents look for educational offers on buyers (including books) and often times come up short when looking for such a tome. This book fits the bill for the agent looking to work with more buyers much better than they have been.

One good example of the "1-2-3" concept in the book title in action is this dialogue to use with a prospective home purchaser - O.K. - in the spirit of the book..."home purchaser" - let me just call it what it is - a buyer. Here's the script from the agent to the buyer:

"Buying a home is really as easy as 1-2-3. The 1st step is to make sure the money is there. If you are not paying all cash, you want to first work on getting pre-qualified for a new loan. The second step is to narrow it down to just the right area for you. And the third step is - again you have the money to buy lined up and selected the neighborhood you want, is to find the exact right home for you - at the best possible price, the most favorable terms, in the time-frame you want -- all with the fewest hassles possible. Does that sound good?"

As famed trainer of realty salespeople, Tom Hopkins has said of this book Selling Homes 1-2-3, it's a "great one that real estate agents should keep handy". I AGREE!

Getting a Commitment for Buyer Loyalty

One of the top complaints from real estate agents about prospective home "buyers" is that some of them are, shall we say politely, a bit (or a lot) flaky. And not in a delicious croissant sort of way.

Some of that "flakiness" goes to buyers who use an agent's time and knowledge, and later that same buyer consummates a real estate purchase through a different realty licensee, resulting in no income for outgo that the Realtor expended.

Bummer! That hurts, man. Cuts deep when they do that, doesn't it?

So how do you get better, loyal buyers? Well, it's really pretty simple!

Here's your talking points, ones you should use at the tail end of a typically 45 minute or so in length initial in-person meeting with the prospective home buyer:

"When I as your Agent take you on as a client, I am obligated to provide you:

- Loyalty

- Obedience

- Confidentiality

- Accountability, and

- Diligence.

(As a quick aside, you might want to briefly define these and give an example or a benefit statement with most or all of those 5 duties...but if not, that's o.k. too)

What I expect in return when I do put these out for you is that the one duty -Loyalty - needs to be a 2-way, not only a 1-way, street! As a someone who is telling me you are looking to buy a home, you need to know that if do you change your mind, there is never any obligation buy. But as your real estate agent, I need to be assured that if you do decide to buy, and I have been performing the duties above, that you will have me represent you by showing you any property first and completing the purchase offer on your behalf. So - I need to count on your Loyalty! Can I?"

Virtually every buyer says "Yes".

And then you can decide to proceed to confirm that loyalty pledged from the buyer in writing through use of an "Exclusive Right to Locate Property Contract"...also known as a "Buyer Broker Agreement"...and I highly recommend that you do so.

Know that it is very hard for people to say "Yes" to loyalty verbally and then attempt to back out when you look to put it in writing!

If they do say "No" (most unusual, especially considering you ask this towards the very end of a consultation, when the rapport & trust is towards its peak), you'll have to decide where you want to go from there. Understand that the pressure is on them, not you, to explain. But perhaps by you stating something such as the following will help clarify and continue the dialogue:

"Really? No? That truly surprises me you say that...

Most everyone says 'Yes!' at this point and then we get to go do the fun stuff - like look at homes that may contain 'the One' for you!

Now, I did cover quite a bit & go over the information fairly quickly with you. What is your real question or concern?"

At this stage, you often find the objection, if any, is little or none and most will sign after you address the one or two items they are wondering about before they agree to proceed.

Or you can go purely on a "handshake" agreement. NOT recommended, but you could.

Or you can think to yourself -"Next!" - & refer them out to another agent or just turn them away. Again, these kinds of situations rarely happen.


Asked the right way, at the right time, as described above, and most will buy through you and make that commitment in writing!

WRITING ADS THAT WORK WELL TO SELL!

The purpose of advertising a home currently listed is to get inquiries on the property for sale. That's a real revelation, huh? :-)

We also know that many agents have cut their property advertising budget to effectively zero in light of current market conditions. Still others think that they don't really ever run any "ads" on their listings. But virtually all real estate agents do place advertisements, even if they don't think of them that way.

For example, the MLS Remarks will probably be your most frequently read ad on a home for sale, especially when considering that some of that language is used in the syndication to consumer websites as well. So we all run ads on our listings!

Next, we need to understand that the difference between a great ad and an average ad is response! It costs no more to have ads that "pull" very poorly (received few inquires on) than to have an advertisement that gets dozens of contacts; calls, emails & texts.

In order to write a great ad, you need to determine exactly what you want your ad to accomplish!

There are three things to keep in mind when writing your ads. Write your ad so that it will do this for:

1. QUALIFIED PROSPECTS: Attract qualified buyers and/or the agents who will bring them to the house.

2. FUTURE SELLERS: Tell prospective Sellers/Clients that we know how to advertise.

3. ENHANCING THE IMAGE: This applies to both the property & the agent, Conveying that you are a professional agent; one any buyer or seller could have complete confidence in working with as their Realtor!

Know too that response to any ad is in direct proportion to the reward the ad promises. A reader will not respond if he does not perceive a sufficient reward. The effective ad sets your house apart and mentions items that buyers are interested in.

Additionally, here are some thoughts about:

PRICE - One study showed over 50% of the readers will not call if the price is missing. Include in the price all the for sale ads. No one likes to call only to find out the house is out of their price range. The caller will usually just quickly hang up when they find out the price anyway, so just give them what they want upfront.

CALL TO ACTION - Use descriptive words to create a feeling for the house. Finish your ad with a strong “call to action” phrase, i.e. Call Now! Create a sense of urgency!

CONDITION - Of interest to buyers are things such as a newer roof, or air conditioning, freshly painted, new carpeting, etc. See the following page for more do’s and don’ts.

CONSTRUCTION - The style, number of levels, type of construction, unusual architecture, and custom floor plans interest buyers.

ENERGY FEATURES - List any “green features,” i.e. extra insulation, lots of shade, solar features, etc.

LOCATION - Research has shown that at least 46% of the readers want to know the specific area the home is in, not just a general area. Give a main intersection or a well-known landmark such as universities, malls, hospitals, etc. Subdivision names alone are not always familiar to many people, so be sure your directions (if any) are clear and start from large well known major freeways and/or intersections.

PHOTOS - Man! How many times do consumers have to tell us this is a top desire of theirs until we all comply? So use photos - lots of them - whenever you can. And decent to awesome quality only please. A little video wouldn't hurt either. As you've probably heard...a picture is worth a thousand...dollars.

DESCRIPTIVE WORDS FROM A TO Z TO USE THAT HELP POSITION HOMES TO SELL FOR THE BEST PRICE POSSIBLE-

Appealing
Beautiful
Captivating, Classic, Creative
Delightful, Dignified, Dramatic, Distinctive
Enchanting, Engaging, Enduring, Enticing, Exquisite
Friendly
Grand, Graceful
Hospitable
Immaculate, Impeccable, Investment, Inviting
Just Perfect
Kind of Like What you've Always Wanted
Lovely
Magical, Matchless, Memorable, Meticulous
Newer
Outstanding
Prestigious, Privacy
Quality
Refinement
Sensible
Tempting, Thrilling, Treasure, Tranquil
Unique
Vast, Velvety
Wise, Wonderful
X-cellent
Youthful
Zestful

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Now it's your turn! Please share with us some of your best ad writing tips!