Tales From the Dark Side #1

[Editor’s Note: As a long time member of the Rain City Guide community, Ray Pepper has offered to share stories with us about his on-the-ground experience working as a real estate broker with $500 Realty. We’re calling these “Tales from the Dark Side” and today, I’m please to hit publish on the first edition of this series. Please give a warm welcome to Ray Pepper as the latest contributor to Rain City Guide!]

walking home in the darkIn an attempt to educate the public and fellow agents of the NWMLS I offer an incident dated Sept 2008.

Client Sam and Tim have been Pre-Approved clients looking for a home in Des Moines with a current Buyers Agency agreement on file.  They attend Open Houses and call me for showings every month or so.  They have been educated on how to advise all fellow agents they are working with an Agent.

Sam found a home driving around and called me from her cell at the vacant residence.  It was a Sunday at 4pm and I got the message about 8pm.  The voice mail indicated she called the Agent on the sign, to inquire on the price,  and as it turned out the agent lived across the street.

As the story unfolds the Agent spent 2.5 hours with our client talking about the home, the history of it,  and the wonderful community she has lived in for decades. 

I receive a phone call to write an offer on the property Sunday night.   I asked my client how they got inside.   She stated the listing agent let me in.   I asked, ” Did you remind her you were working with an agent?”    She said absolutely!

An offer was written around midnight and was promptly sent Monday morning.

The next phone call I received was one that has been repeated before  but this time much harsher then I have ever heard.   It reminded me of my old female Drill Sergeant at Fort Leonard Wood.  ” Listen here Pepper!”  “I’m a million dollar producer!”  “I’ve seen the likes of you come and go!”  “My time is very valuable!”  “Don’t speak until I have finished what I’m saying!”  “Your clients lied to me!” ” We have a wonderful community here and I don’t think dishonesty is a good fit for our community!”  “I’m not here to do your work for you!”

I’m new here to RCG and I believe none of you know me personally.  Those who do will attest that there is nobody more sincere, honest, and willing to take any and all slanderous language.  I have listened to it for years at the Seattle/Tacoma Home Show  and Puyallup Fair.   I took it all in as usual.   I attempt to never laugh but always educate based on the rules set forth by the NWMLS and the State. 

I immediately contacted my clients and told them about the incident and how I had to remove myself from this transaction.   My clients stated to me SHE is the liar and the agent “offered” to just walk across the street and show her listing to them.   As it turns out while I was on the phone with my clients the listing agent called back for Round 2 of screaming and I continued to listen.   I must confess that at times I find this very therapeutic and relaxing.   I was threatened to be turned into the NWMLS, the State, and  her Broker.  I strongly encouraged her to do so. 

We all know how this story ends.  The Buyer wanted the home.  The Seller wanted it sold.  The buyers walked because they did not want to have this agent as their neighbor. 

It is my opinion the only one who ever loses from this type of behavior is the one who will never know it happened.   At last look the house still remains on the market today, this time with a new agent.  

Our clients closed on their new home in April 2009.

[photo source: Sir Mervs]

Are you making your client homeless?

I’ve been wanting to warn sellers and seller’s agents about this for the last 10 days or so.  Courtney’s new post is a great lead in to this added consideration for sellers and listing agents.

CAN YOU BUY THAT HOUSE, WHEN YOUR HOUSE SELLS?

Having had the benefit of working in a market exactly like this one, back in NJ/PA in 1992 or so, I think this warning will be timely advice for many.

When an agent is called to sell a house, they touch on the subject of “Where are you going to go when this house sells?” But most often the antennae of the agent is focusing on whether you will also be buying a house with them, or if they can get a referral fee by referring you to an out of area agent (usually 25% of the commission.)

WARNING TO SELLERS: IT IS VERY HARD TO GET A MORTGAGE.  In the last market like this, many sellers assumed that since they had a HUGE downpayment, they didn’t have to worry about qualifying for a mortgage on the house that they were planning to buy.  NOT SO!

Having 50% down and little income could leave you homeless, as NWMLS does not permit “provisional” listings.  There’s no turning back.

Here’s how it usually “plays out”:

1) Seller doesn’t want to look at homes until their house has a contract. With houses sometimes sitting on market for well over 100 days, looking at what you will buy when your house sells is often put off until you have an actual buyer for the home.

2) Once the contract is signed around, the seller goes out and makes an offer on a house they are buying with 30% to 50% down.

3) Often the seller and the agent for the seller of the home they are buying are so impressed with the big downpayment, everyone all the way around assumes that someone with that large of a downpayment can get a mortgage.

REMEMBER:  The buyer of a home has a legal out phase lasting about 10 days, but the seller does not have a legal out phase if they can’t get a house to go TO.

Often you can’t just go to the buyer and say, “Sorry.  I can’t buy a house so you can’t have mine.”

So to listing agents, I know you want that listing, and your are primarily interested in getting the seller to sign that listing contract.  But be careful that you are not making your clients homeless. If they are people living on a fixed income, saying they are planning to buy, part loan, your ears should perk up.  Make sure they check with a lender as to getting that loan…before you sell their house out from under them.

We are often in the business of “GETTING PEOPLE FROM HERE TO THERE” moreso than simply “selling houses”.  Don’t leave your seller’s homeless, as you walk off to the bank to cash your commission check for “selling their house”.

The Dustin Luther factor: Where it all began, sprinkled with blogging surprises

First, I don’t know about other’s experiences in blogging, but stumbling upon Rain City Guide over a year ago or so and Dustin’s introduction to me of the world of moving away from a static glorified business card (called a website) to that of the dynamic and interactive world of Blogging has had a tremendous impact on me and as a small business owner (like everyone here).

For example, I’ve been able to make contacts with people whom I would never have had the chance to without the platform of blogging, both personal contacts and business contacts. Today, I got a chance to head back to my old stomping grounds in Seattle due to a courtesy signing with a client who teaches at Seattle University. After finding a parking spot, I headed over to the campus and walked to the School of Engineering to meet for our appointment. After about 30 seconds, I realized I was talking to an old neighborhood acquaintance whom I have not seen for over 30 yrs!

Inspired, after the appointment, I drove up Madison St. towards 19th and headed North towards St. Joe’s School on 19th and Aloha where I went to school as a kid. On the Northwest corner of 19th & Aloha is a small building where I was given my first job as a skinny, messy 70’s style haired bloke. The impact of that first job is really what set the stage for the foundation of work ethic and character building.

My first job was given to me by the late George and Evelyn Benson of Benson’s Mission Pharmacy on Capitol Hill. For those unfamiliar, George Benson was a long time pillar of the Capitol Hill community and a respected Seattle City Councilman. You want to talk about customer service? I distinctly remember George pulling up in his car to hand deliver a prespcription for my mom or dad at our front door a few blocks away. Those were the days of intensely personalized service. Mission Pharmacy and the Benson’s are no longer, but the windows I washed and the sidewalk I swept are still there as they were 30 years ago.

I headed over to my old house where I grew up, drove around the front of the home, got out of my car and headed over to the steps and walkway that wind up to the front door, but I stopped short of that trek—memories just racing through my head. Walking back to my car, I then drove around to the alley, which really was “our” front door entrance. Peering through my passenger door window I stared up into my old bedroom window and into the back yard. I was too embarrassed to walk up and knock on the door. Perhaps another day.

Part of the motivation for telling you this is about finding out who you really work with and the idea of “trust.” Does it matter to you? Trust in real estate is the glue that keeps customers coming back to you. Trust to do the right thing. Trust to work in the best interest of our mutual client.

When you strip away all the marketing persona and fluff in our industry and get to know potential new clients in a transparent and personal way, giving a glimpse into what makes you tick, warts ‘n all, it is remarkable how quickly you forge trust in the person standing across from you. Finding a common denominator and building trust with a potential client on a level that has nothing to do with business has been exceptionally fruitful.

Since the beginning of this year, just days ago, through blogging, I have reunioned with two old childhood friends and received fruitful clients. When you strip it all away I’m not terribly different than any other agent or loan officer trying to make a living. On Thursday, I headed out to brokers opens to meet some new people in the business who work in our area and I bumped into an old “acquaintance” whom I met at college in 1985. I haven’t seen her for 21 yrs. The funny thing about the meeting was that she (the agent) mentioned to me “ya know, I just speak my mind, and I wanted to you to know that I had a crush on you way back when we were freshman.” What a Brokers open and what a week.

Dustin, although I’ve never met your family personally, thanks for introducing me to a way that a small fry can compete with the Goliath’s.

Selling houses is a flashback to dating on Match.com

[photopress:heart.jpg,thumb,alignright]Yes, that’s right, I too have used Match.com in the past and it’s actually how my partner, Michael, and I met. This weekend I was reminded of the dating experience online as I perused houses in the Greenlake area with some clients. First, we looked at houses in a price range of over $1 Million. The house they’ve written an offer on is gorgeous but the photos of it were horrible. It was exactly like how Michael and I met because he had a horrible photo – so I almost didn’t meet him – and it ended up that when we really did meet it was love at first sight. It was the same way with this couple, I almost didn’t show them the house because I was afraid it was going to be lacking in the aesthetics department based on the lame exterior photos – there were none of the interior. Thank goodness I took a chance and used it as a comparative for another expensive home and they ended up falling in love.

[photopress:IMG_1075.JPG,thumb,alignleft][photopress:master_bedroom.jpg,thumb,alignright]As I’ve been in the real estate biz only a few years I imagined that all agents who work with higher priced properties might actually take the time to provide exceptional skills when it comes to marketing a home. Well, apparently this isn’t the case. Do sellers just not think to ask to see what their house will look like online? The post that came in a few days ago about putting in good photos on real estate listings really strikes a chord with me. Which photo would you rather have for your home? The one that limits the scope of the room to be seen and is kind of dark and depressing? Or go for the warm, inviting photo that gives some sense of the actual space?

I’d post the photos of this house here but since we’re under negotiation right now, I can’t. Let’s just say my client’s digital photo did a lot better than the one the agent took. I have to say that, like Michael, I’m glad someone put in a bad photo this time because otherwise a love match (for me and then my clients) wouldn’t have been made.

The Super Agent

It seems to me that the agents who post and comment on RCG are ‘mom and pop’ agents whose business is limited to their ability to work with clients directly throughout the real estate transaction. I’ve not heard from any of the ‘Walmart’ agents who have built organizations allowing them no upper limit on their ability to service clients. In fact, many comments and posts have implied that the latter approach is bad for the consumer. Is Walmart bad for the consumer? We all may hate how Walmart shuts down mom and pop stores that can’t compete with the scale and volume pricing of Walmart, but does this have anything to do with the end consumer? Macroeconomically and politically, absolutely; however, consumers have voted with their wallets that the Walmart model makes sense.

When an entrepreneurial agent builds a business, hiring a licensed assistance, then listing specialists, then buying specialists, then a business manager, then a lead manager, why do the lone agents seem to have little respect for the organization they have built? Given the state of the industry today, as others have defined it, where new agents get little training and modeling by experienced agents, wouldn’t such a scaled organization be welcomed? Think of the licensed assistant? It seems to me that by working with an agent so successful and productive, this assistant would be exposed to every type of transaction, and grow up to be a better agent.

To me, it’s the scaled super agent business organization that would be the best place for a new agent to learn the ropes. As many have written here on RCG, the traditional brokerages have little motivation to spend a lot of time growing an individual; however, a good super agent aligns incentives so that the training and modeling he/she provides others within his/her organization contributes to the organization’s bottom line, and such an investment pays off as productivity grows.

Do consumers suffer with these super agent organizations? The mom and pops would claim they do, for in their paradigm, the real estate transaction can only be truly successful if the agent is hands-on throughout. Do the consumers feel slighted, unsatisfied? My guess is no, for the most part. No matter big or small, an agent needs a bedrock of referrals to succeed long term. Clearly, these super agents excel in lead generation and marketing, but a happy client is a happy client, and they’ll refer their friends.

As a new agent, and as an investor, I would love to be in a position where I could lead an organization and model it for success, and get paid handsomely for it. If any super agents are out there reading RCG, I’d love to see your perspective represented here on these pages.

The “Ideal” Business Plan

[photopress:meeting.jpg,thumb,alignright] In answer to Russ’ comment on my post of this morning, How to Choose a Client, let’s break down how an agent can do a super-duper job at representing their clients’ well, choose their clients wisely, and also make a good living AND price their services fairly….all at the same time!

John Q. Agent wants to make a six figure income of $100,000 a year after gross expenses. He decides to work with no more than 2-5 active clients at one time, so that he can do “Whatever it takes” to help his clients fulfill their objectives. By focusing on 2-5 good-hearted, honest and serious clients, he is able to sell 2 houses a month and loses only 1 in every 15 clients he accepts to “take on”. By focusing on only 2-5 clients at once, he does such a super job, that he doesn’t have to pay for leads or spend the bulk of his time looking for leads, because his very happy, good-hearted clients send him business. By recognizing that he represents people for a living, and doesn’t sell houses for a living, he leaves a long trail of happy closed transactions in his wake. All of this “good will” brings him a steady stream of new clients, so he can spend all of his time representing his clients and very little of his time dredging the bottom of the barrel for “new leads”. His “good-hearted” and happy past clients, know other “good-hearted” people because, “birds of a feather flock together”.

Average home price is $400,000 in the Seattle/Eastside Market. That’s a little under the actual median price, but let’s assume that the best clients don’t necessarily have the most money 🙂 Let’s assume that John Q. Agent charges slightly less than 3% for clients buying and selling at $400,000 or less and 2% for clients buying at $750,000 or more and 1% for clients buying at $1.5 million dollars or so and also has varied programs in between, depending on the timeframe and actions needed to fulfill the client’s objectives.

So John Q. averages $13,500 per client, but gives $4,500 of that back, even after the reduced rate, on average, because he only needs to make $9,000 apiece X 24 sales (two a month) to make $216,000 of which he pays his broker a cap of $20,000 annually leaving him $196,000 before “expenses”. Keeping Russ’ figure at 20% for “expenses”, John Q. Agent exceeds his goal of $100,000 by making $156,8000 after expenses working with only 2-5 good-hearted, honest clients per month and selling 2 homes a month and “being the glue” that holds them together so ALL of them close, and it is NOT a numbers game…in fact, it’s not a game at all.

John Q spends 20 hours a week on his “in escrow” transactions and 20 hours a week on helping his “next to come out” listings get their homes ready and 10 hours a week doing all that other stuff that agents do. He spends so much time focusing on these few clients that none of them “leave him in the dust” or “screw him”. Though a few do decide not to buy or sell…and he wishes them well.

And they all lived happily ever after…

How to Choose a Client

[photopress:diversity.jpg,thumb,alignright] I have only one criteria when choosing a client. That criteria is very difficult to describe, because the best term to describe my favorite clients, I only know in the Greek language. I dated a Greek guy for six years, from the time I was 16 until I was 22. Whenever he introduced me to his Greek friends and relatives, they would lightly and quickly thump their fist on their chest and say

“kalu ka thYA” (emphasis on the YA). Generally, they were saying, “She has a good heart.”

When I meet a potential new client, I am actually interviewing them to determine whether or not I want to work with/for them. This can be a great business or it can be a miserable business. The difference between the two is the clients one chooses. Agents who view all people as “leads”, who think anyone wanting to buy or sell a property is a “potential client”, do both themselves and the client a great disservice.

My talents are best suited to people who need my “help”. To sellers who need to sell their home at the highest price they can get, and who are willing to roll up their sleeves WITH me, and get the house to its highest potential, spending little or no money to do that. To buyers who recognize that there are many potential pitfalls in the home buying process, and who want someone to tell them when they are about to make a mistake.

[photopress:winner.jpg,thumb,alignright] I have very little time for someone who wants to end up with all of the chips on their side of the table when the “deal is done”.

I have very little time for a seller who thinks his house is ready, because he shouldn’t have to do a thing to get top dollar and he can wait for “just the right sucker” to come along and fork over more than the home is worth, so HEcan WIN and THEY can LOSE.

I have NO/ZERO time for a buyer who wants to find some little old lady who can be tricked into selling her home for a great deal less than it is worth. (Yes, I have met people like that.)

All of of my clients are people raised with good values and who have a strong moral code, in other words…people who possess “kalu ka thYA”…”a good heart”. Once in a blue moon, I agree to represent a total bastard…but only because I feel sorry for his wife 🙂

So when a buyer or seller complains, “I guess they didn’t NEED my business because they never called me back after we met”, maybe the agent didn’t “follow up” because the agent chose you, not.

The Best Client Relationships are Solidified in the Darkest Moments

[photopress:austinpowers.jpg,thumb,alignright]“Allow myself to introduce….myself” – Austin Powers

I’m in my first few months as a full time working agent. I retired from my career with a successful Internet marketing company after 8 1/2 years of helping grow it from a six person start up to a public company with offices on three continents. I left because I had lost my passion for the industry; I didn’t go to work each day looking forward to the challenges that awaited me. I needed something new. It took me two years to discover it, but after spending the last year with my wife investing in real estate part-time, I realized that I had found my passion. I had found my bliss. Real Estate. I got my license initially as a way to list our own investment properties for resale, but realized that real estate sales and investing got me excited. Here I am, starting fresh in the sales industry, juggling a number of balls related to real estate – client acquisition, client management, project management (on my investment properties) and property acquisition. It’s been extremely stressful (waking up in the middle of the night, in a cold sweat, fearing that I’d calculated time incorrectly and missed an inspection deadline), but also extremely rewarding (I sure don’t miss rush hour traffic!). This is my first post of any substance, and the goal of my commentaries is to reflect the sum of my experiences (which are currently few in real estate sales) Right now, I have little sales experience, a modicum of investment experience, and lots of client service experience taken from my previous careers in tourism (during my 20s), and online advertising (the bulk of my 30s). I’m thrilled that Dustin invited me to post.

Customers don’t expect you to be perfect. They do expect you to fix things when they go wrong” – Donald Porter

One reason that I have succeeding in client service roles throughout my careers is that I tend to remain eerily calm when surprising and unfortunate situations arise (whenever one of my kids start choking, my wife completely panics and starts screaming; I set aside the adrenaline and calmly unlodge the blockage with a textbook execution of the Heimlich Maneuver). In business, I refer to the actions required to resolve these problems as firefighting. Most of the time, firefighting is required due to errors made by others outside of my control. However, no matter who is at fault, the client only has an opportunity how I deal with problems.

Rule Number One – Listen…Then Solve Problems

I get into trouble a lot with my wife whenever she starts telling me about her problems. I listen just long enough to identify the course of action needed to solve the problem, then interrupt her and explain how I’ll fix her problem. Big mistake. Most times, she isn’t looking for my to solve a problem, she just wants to unload her problems on to me…it makes her feel better having talked through it. After I validate her feelings, I can then ask if she wants me to help her with anything.

The same principle applies with clients. They come under stress from parts of their lives to which I have no exposure or access. For example, they may start complaining that they haven’t seen enough houses, and imply that I should pick up the pace and increase the number of showings. Before I try to problem solve and start scheduling more showings, I’ll listen carefully and try to determine why they are asking this question – especially when there has been no hint of this kind of issue before. In most cases, compartmentalized stress from situations spill over into my world. Instead of taking it personally, and before getting defensive or simply agreeing to the request (especially when I know I have been working hard on the buyer’s behalf), I’ll listen to what they are saying, acknowledge that I appreciate what they are feeling, then ask a series of questions designed to determine if there really is a problem they may have with me. If there is, I’ll offer solutions.

When I worked for Princess Cruises, I learned of an interesting statistic about customer service. Clients who wrote to the company complaining of a negative experience on their vacation demonstrated a greater loyalty to the company – they more likely returned on a second cruise – versus a random sample of cruisers. Why? These clients’ feelings were validated with a reply from the company. Was this loyalty bought with credits or discounts on subsequent trips? No, in most cases, it was a personally written letter or return phone call, where the clients felt that the company listened to them.That amazed me at the time, and you know what? It has born out in practice many times for me personally.

Rule Number two – Admit Your Mistakes, and then Proactively Solve Them

Here’s a situation I just saw in my first deal. My client had asked for a bunch of repairs on the 35R, including a certification showing a resolution to a possible Carpenter Ant issue. We eventually arrived at a deal, but instead of a fresh blank amendment stating the new price, I included the original 35R showing the repair list. All of you seasoned agents can see where this is going. It’s the day of closing. Both buyer and seller have signed around. I’m ready to pop the bubbly celebrating my first deal. Then I get a call from the Mortgage broker. The lender is requiring that an inspector clear both the carpenter ant issue and a dry rot issue (also in the report). Yikes. This made it past both the mortgage broker, and the loan processor prior to closing. I could have started yelling at these folks for not catching the problem when I submitted it (they have enough experience to know that submitting such a list is a red flag). Nope. I went into firefighting mode. I called the listing agent, told him of the problem; I called my client, admitting my mistake and letting him know that I’d cover any costs or penalties associated with this mistake. I then scrambled to get a pest control company out to the house to treat it and clear it, and I called the contractor who has worked on a couple of my investment properties to check the dry rot issue (which truly wasn’t an issue), and he cleared it.

The listing agent was impressed with my dedication and focus on solving the problem. Not only for my client, but his clients would have been impacted by a scheduled, near simultaneous closing for their next home. The listing agent told me that upon sharing my efforts with his broker, she said she’d love to have me be one of her agents. The deal closed a day late, and cost me $250 for the pest control, but beyond that, there was no negative impact to either side. My client was thrilled, and appreciated my honesty and my hard work and scramble to fix the problem. In my opinion, this is the type of client service that wins clients for the long term (especially if the client is an investor, as this one is), and wins referrals from satisfied clients.

In closing, no one is perfect. When I first started my client service career as a tour guide, I tried to please everyone, all the time – trying for perfection. This is impossible to achieve. However, by communicating honestly, and by performing my absolute best under less than ideal situations, any negative perspectives my client had were turned into positives. Anyone can do well when nothing goes wrong, and the client may very well come to the same conclusion, and deciding to use someone else next time. However, when the client saw how hard I fought for him during this adverse situation, he experienced my character, and will remember that in future situations, I’ll have fought for him. This helps create loyalty.

“To Achieve Perfection is not Nirvana, It’s a Self-Imposed Life Sentence” – Seattle Eric

Interest Rates: When is the Best Time to Lock?

I always advise my clients to lock in their interest rate at the earliest opportunity. Gambling with a client’s interest rate is never advisable. In my business, I have a standardized system in place that we adhere to for all of our clientele. A mortgage loan cannot be closed without locking in a rate, and there are three
main elements to take into consideration:

  • Interest Rate
  • Points
  • Length of the lock

Locking in on a rate does not obligate the client to commit to the loan until the loan is actually closed. The lock simply eliminates any risk of the borrower being exposed to market volatility. It provides the security of having time to complete the mortgage and Real Estate transactions with some sense of order. The lender must disburse funds to complete the transaction within the rate−lock period, or else the original commitment to provide a loan at a certain interest rate will expire.


When a lender permits an extended lock−in period, the borrower will usually see either a higher interest rate or more points associated with the loan. The lender does this to minimize their own exposure to market volatility; hence the borrower pays for the lender to take on this risk.

For example, a 30−day rate lock commitment may cost the consumer one−half point, while a 60−day rate lock commitment could cost 1 full point. If the borrower needed an extended lock period, but did not want to pay points, the lender could make up the difference in the interest rate. In this case, typically, a 60−day lock would have a higher interest rate than a 30−day lock.

In my business, our standard procedure is to lock in a rate as quickly as possible once we have received the loan application. My team and I let our clients know that while interest rates fluctuate daily, most lenders do not want to lose any business. We know that in many cases, if there is a significant rally in the market that causes interest rates to drop .25% or more, we can ask the lender to renegotiate the rate. or understand that we will take the loan to another lender.

Often the lender allows for a renegotiation of the rate to avoid losing the loan to another lender. If we allow our clients to sit on the fence and not lock in a rate quickly, we would leave them exposed to market volatility. Then, if rates do increase, the borrower may be unable to qualify for the loan they want, which is a situation we try to avoid at all costs.

By knowing our clients’ needs and working intimately with them to make the right decisions, my team and I are proud to say that we have many clients who are raving fans.