Author Archives: Tim

Appreciate those behind the scenes

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I would like to send a gentle reminder to those in the real estate business to make time to recognize and express appreciation for those people that work tirelessly behind the scenes– the staff who are working to provide great service to our mutual clients and reduce problem transactions.
I’m talking about allied real estate professional back-office-worker-bees who are frequently overwhelmed, overworked, commonly under appreciated and who stay very late after hours to make things happen while providing great customer service.

Please recognize: title officers/units and support staff, loan processors, funders, and especially escrow LPO’s and support staff. These folks and many others really make it easier for the agents and their clients wherever they work all across the country. They deserve your acknowledgement and thanks!
Happy Holidays!

Real Estate and Ethics: Collision or Harmony?

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The “Party is over” for local company
Elizabeth Rhodes of The Seattle Times reports on the rise and fall of Merit Financial in today’s Sunday paper. Ironically, it is not in the real estate section (it should be) but the business section— a full page article, above the fold.

I encourage everyone who is in business and those not already aware of the demise of Merit Financial to read the article in Sunday’s paper. I grabbed the bulldog edition and read through it taking away several points and add a couple personal suggestions:

  • It is critically important to know who you do business with.
  • It is of equal importance to understand (as much as possible) the financial foundation with those whom you entrust your clients. Will they be here today and gone tomorrow? There are several ways to get a general snapshot of this legally and unobtrusively. It has saved me more than once of going into business with others who have a poor track record or are saddled with debt. Debt and escrow trust accounts are a disaster waiting to happen.
  • Success is not necessarily defined by owning designer shoes, clothes or driving Hummers, Porches, Mercedes, BMW’s or living in a McMansion. I think we all have our experiences of knowing a multi-millionaire or two who drives a modest car, shops at Goodwill or is found handing out $100 Bills to surprised people in Chicago, as was the case last week.
  • Worry about your very last customer’s experience and service satisfaction, not the trappings of the paycheck. Income will only follow if you are passionate about providing great service at a great price, in that order.
  • If the focus is only on the paycheck, increasing that yield spread premium, or making a “deal,” your customers will see right through you, sooner or later. It shows.
  • Fundamental real estate knowledge coupled with the experience of having a great support structure around you will lead to satisfied customers and foster long-term business relationships.
  • Make it a point in 2007 to surround yourself with real estate professionals in your support structure that may know more about their expertise than yourself. It is not necessary to be an expert in every arm of real estate. There are great loan officers, excellent escrow and title staff that are eager to assist you with your questions. The more I hear “I’ve been in this business x amount of years and I’ve never heard of escrow doing such a thing or…..(insert your own verbage)…. the more we know it is a dead giveaway that posturing is taking place and what is meant is “I don’t know.” There is much to gain and everyone learns more collectively if there are less “I know it all” personalities. What is sorely needed and refreshing to hear is, “I have never run into this scenario, please help.”

Escrow closes the door on a closing

Every real estate practitioner has had the opportunity to work through an ethical dilemma in real estate. Recently, our escrow office experienced probably one of the more difficult ethical issues: coming across highly probable transaction fraud a business day prior to closing. We wrestled with the issue all weekend a short while ago. Any way you sliced it, the ramifications were not good. In our minds, the “what-if scenario flow charts” were in full swing. For example:

  • Don’t close the transaction and lives will be turned upside down, not to mention thousands of dollars of commissions lost, including our own earned income. Side note: escrow (the “presumably” neutral party) only gets paid if the deal closes, an issue that I personally would like to see changed and take up with Dept. of Financial Institutions or others in Olympia.
  • Obviously, another downside is that we will probably lose the business relationship forever, regardless of whether we are correct or not. Certainly, how this plays out will clearly show the true colors of the agents involved.
  • Close the transaction and the risk grows exponentially as time goes on. Escrow will be named in a claim regardless of all the disclosures and tight legal language escrow has.

Interestingly, with the broker and sales agents fully aware of why we elected to not close, they have elected to try another company to close the transaction. Hopefully, they can work through the problem and get it done in a legal and ethical manner. We wish them the best.

In the end, pushing the ethical limit or being a party to fraud is just not worth the risk, short-term and long-term.

The Escrow Files: sometimes stuff happens

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[photopress:destroyed_check.JPG,full,centered]
When checks are late to the recipients, escrow tends to sweat. Now we know where this check ended up! Everyone started laughing when we received this 1/6th scale “lost” check in the plastic baggy from the post office. This was shreaded and after a few minutes of taping what we had together and smoothing it out with books, this is what was left!
Note the language on the postal baggy: “We care….we hope this didn’t inconveniece you….” Nah, we enjoy angry customers wondering where their money is. 🙂

Agents & Loan Officers to communicate regarding seller-paid closing costs

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(Editor’s note, Tim jumped the gun and posted this article by his wife, Lynlee, before I had a chance to set her up as an author. As soon as I have it set-up, I’ll give her the proper introduction.)

I’m writing this because of numerous problems I have encountered in regards to seller paid closing costs. It has been a trend for buyers to increase the purchase price in exchange for sellers paying buyers’ closing costs by the amount of the price increase. For example, we commonly have transactions where the buyer offers $10,000 more than the listing price and the seller will pay up to $10,000 of the buyer’s closing costs.The financing addendums used in our area specifically indicate that the seller credit may be applied only towards actual closing costs/pre-paids (interest,taxes, HO Dues, etc). The problems that we have encountered occur when the closing costs are less than the amount the seller agreed to contribute.For example, if the seller agreed to pay up to $10K, and the closing costs only come to $8K, then the buyer is looking to get the difference in some manner. Buyers get extremely upset at their agents when they have increased the purchase price by $10K and they are only receiving a credit of $8K. Again, the seller can only pay the actual closing costs.

Suggestions to avoid this problem and reduce obvious tension created by having escrow call the parties involved at the very last minute (which by the way, is usually the day or two before closing):

  • Have the buyer get a good faith estimate from their loan officer BEFORE determining what the seller credit should be.
  • Agents, MAKE CERTAIN that the loan officer knows the amount of the seller credit. If the seller credit will exceed the closing costs, have the difference applied towards a loan discount fee to buy down the interest rate. THIS SHOULD BE DONE WELL IN ADVANCE OF CLOSING DOCS SENT TO ESCROW. (I know many escrow folks may thank us for saying this) 🙂
  • The difference CANNOT be used to reduce the purchase price. This would require the loan to go through underwriting again.
  • Agents need to understand the ramifications of increasing the sales price and having the seller pay for buyer closing costs that may not meet the intent of the parties.

When this problem occurs the common knee-jerk response by the agents to escrow is “why didn’t I hear about this sooner.” Escrow’s response is typically, “we agree.” 🙂

It is always better to “anticipate” problems that can occur and work through issues including being receptive to suggestions by your loan officers and other real estate professionals rather than being “reactionary” when one is in a pickle that is entirely avoidable.

Note: This is general in context and is written primarily for Washington State

The Rockford Files leads to "The Escrow Files"

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For those of you who grew up in the 70’s, if you were like me and missed an episode of the Rockford Files, you were really bummed out. Missing the Rockford Files was almost as bad as my parents making me late for my soccer games. Not a good thing. Tivo, where were you?

Jim Rockford (James Garner), what a guy. He always seemed to get into a pickle and get out of it. That Pointiac Firebird of his; all my friends wanted one, even if it meant riding my dirt bike to the store and buying a $2.50 model of it and putting it on my dresser. That was good enough for me. Those humorous one liners with “Angel,” brings back lots of great memories. The humor reminds me of some of the things we have come across in the world of escrow. In escrow, if you can’t find any humor in the business, it will eat you up.

Rather than send out mundane APB’s to our entire client base about issues that come up or tips based upon transactions that go haywire, we think that adding humor into the fold has more impact and can also be helpful to our Realtor customers in providing better service and foster smoother closings for their clients.

For example, escrow companies are extremely busy at months end and the phones ring constantly. It’s hard to get work done when you receive phone calls from nearly every party, sometimes two or three times in a day, asking, “is it closed yet?” So, to help reduce stress at month end, we started a “counting” system where we tally the transaction with the most phone calls asking, “is it closed yet?”

We made the question, “Is it closed yet?” into a funny YouTube video parody skit, starring our kids who play the Realtor, the buyer, the seller and loan officer. The movie series is called “The Escrow Files.” This Fall our series will be both print and video.

Since the month ended yesterday, the transaction with the most “is it closed yet” calls was nine! For perspective, if our small office closed 30 purchase transactions this August, you get a good picture of all the people calling: buyers, sellers, agents, loan officers, funding depts, etc….on just one deal…now multiply by 30. Maybe we should get another number from Verizon dedicated as our “Is it closed yet?” hotline!

To tickle your funny bone here’s a sample from this year’s, The Escrow Files:

  • Written on an “Addendum” during 2nd quarter 2006: “Buyer to walk through house prior to closing.” Didn’t they do that already, like many times?
  • Lowest earnest money amount winner ytd: $200 cash. Wow.
  • “Should I stick around for you to cut my commission check?” –agent with clients who just signed their loan docs and the deal won’t close for another week.

Stay tuned for more and have a great three day weekend! We are looking forward to the day off!
Tim & Lynlee

Lynlee's Tips to maximize seller proceeds

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[photopress:Lynee_Signing_1.JPG,thumb,alignright]

Photo to right: Lynlee Kane w/ clients

We frequently close transactions in which the buyer offers a higher price than the list price in exchange for the seller paying buyer closing costs. Most of the transactions of this type actually result in the seller netting less than if they accepted a full price offer without concessions. We recognize that many buyers are cash poor and need to have the seller pay closing costs.

When writing your contracts please consider that the higher price will result in the seller paying higher excise tax, real estate commissions, escrow fee and title premiums.

For example, a very common $10,000 seller concession (offset by increasing the sales price) will cost the seller $778 (6%, 1.78% excise) in excise tax and commissions alone.

Sellers usually do not consider these costs until they come to the closing table and actually review the numbers on the settlement statement. This obviously creates an awkward situation for the listing agent who may have told them it was a wash.

Over the year, we have documented only one case where the listing agent addressed the increase in excise tax via a commission credit. Only about half the time we receive addendums stating that commissions will be based upon the lower or original list price.

While assisting 100% financed borrowers with closing costs is helpful in making a sale, make certain your sellers understand that it may cost them more.

  • Consider Excise tax at 1.78% in most jurisdictions
  • Consider the additional commissions at 6%
  • Consider that title and escrow premium may also increase

Wishing you all the best in smooth closings!

"Tiptoeing" through ethical minefields

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It’s getting a little warm in the kitchen of Real Estate

Two questions have been eating at me for some time.
First, one of the most difficult questions to answer deals with my own brethren in the escrow industry. Why is it that a traditionally transaction “neutral escrow company or service” only receives compensation if a transaction successfully closes?

To me, at least in the realm of escrow, this is the mother of all potential conflicts of interest. Isn’t it a conflict of interest to the parties involved and our fiduciary duty to the lender (yes, folks we do have a duty to protect the lender from potential fraud, which is clearly stated in escrow instructions from some lenders) if we are only paid if the deal closes? Wouldn’t that create a lot of problems, particularly if you have pressure from loan officers or Realtors to “just get it done

Marketing Messages

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A message different than any I’ve seen.

We see real estate ads everywhere: The huge Realtor or Real Estate Office centric billboards, shopping carts, sitting benches at bus stops or supermarkets, radio ads, at malls, various print media, internet, etc.

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And then this. Is the message effective?

Homeowner a Guerrilla Marketing machine

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After coming home this past weekend from a family trip to Lake Chelan and Ephrata in eastern Washington, I couldn’t help but notice (including thousands of others driving westbound into Seattle on I-90), the “For Sale” sign draped over a home that was located just over the westbound I-90 tunnel as you approach Seattle’s downtown. You can’t miss it.

The home also made the news in today’s business section of the Seattle PI. I wonder if the homeowner knew they would get the attention of the local papers and blogs. Talk about leveraging the location of your home when you have to sell your home! Guerrilla Marketing at it’s best.

Realtor APB: How to lose clients

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In the Aug. 13th blog missive at Bloodhound Blog, Greg Swann discusses his recent experience with a client who he successfully helped with finding a new home. The twist was that the buyers he was working with had been working with another agent. As you can imagine, the other agent was frustrated and angry that they lost out on a sale. Find out how the other agent reacted by reading the story.

A few months ago I came across an excellent article in USA Today called “The waiter rule.” I shared it with all the professionals we work with. Several CEO’s of Fortune 500 companies were profiled in the article. The CEO’s would take a potential new hire (for an executive or management position) to lunch or dinner. The CEO’s would see how the recruit treated wait staff. The results were interesting and revealing. How you treat others (co-workers, support staff, allied professionals) in business relationships, however difficult or stressful, speaks volumes about your character and leadership in business.

One recent example played out in front of my wife who was signing a client. The client had questions regarding the transaction and called their loan officer. Everyone knows that if a cell phone is turned up loud enough you can hear the conversation loud and clear.

Unfortunately, for the loan officer, my wife heard every word: “…escrow does not know what the #%! they are talking about.” Not only did the comment embarrass the client, but it made us evaluate the working relationships we have with everyone we work with. Ouch.

Situational Values: How do you stack up?

Bill Swanson, CEO of Raytheon Corp. has this to say:

“Watch out for people who have situational value system, who can turn the charm on and off depending upon the status of the person they are interacting with. Be especially wary of those who are rude to people perceived to be in subordinate roles.”