Category Archives: Industry Talk

“Its a Good Time to Buy”? Not until 2013…

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I caught the recent piece on Seattle Bubble replaying NAR ads over the last few years, each ad more urgent than the one prior in recommending the purchase of a home. The ads raise an interesting question: Exactly when if ever is it really a “good time to buy,” generally speaking? And more to the point, given the current “buyer’s market,” is it a good time right now?

NAR good time to buySeems to me that any thoughtful analysis would say, “No.” Really, in some ways this might be one of the worst times to buy, second only to buying into an existing and already overinflated bubble (say, 2005-08). [Editor’s Note: probably inappropriate hyperbole.] Why? Two factors:

First, its pretty widely accepted that the housing market is going to limp along for the next few years. Values will either bump along the bottom, or even drop a little — or a lot? — further, for the next year or two. So in terms of “timing the market” there appears to be either no loss or possibly — probably, depending on your degree of pessimism — an actual benefit to staying on the sidelines for a year or so.

Second, up until last week, when somebody asked me whether now is a good time to buy, I always pointed out the historically low interest rates. But that rug has now been pulled out from under me, as interest rates will remain at historic lows well into 2013. How do we know? Because the Federal Reserve is holding the federal funds rate at essentially zero percent until then, and mortgage rates are closely related. Admittedly the federal funds rate is not the only influence on mortgage rates, as they are also heavily influenced by the rate on U.S. treasury bonds. But given the likelihood of a Euro-zone collapse — larger by the day, it seems – it appears that U.S. bonds will remain one of the favorite “safe havens” for some time to come. And that means bond yields will remain low.

So, a flat or declining market, combined with historically low interest rates that will remain low for another 18-24 months, means that now is NOT a good time to buy, generally speaking. Do you think we’ll be seeing a dramatically new NAR ad anytime soon? 😉

And now for some backtracking: This entire analysis is focused only on general market trends. As others have pointed out, the question of whether it’s a good time to buy must also take into account unique personal factors. Needless to say, if you’re anxious to put down roots, or you’ve outgrown your current place, or if anything else is going on in your life that makes it a good time to buy NOW, then its yes its a good time to buy. But if you can wait, then you will most probably either be in the same or a better situation a year from now.

The Question Your Real Estate Agent Doesn’t Want You to Ask

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What is the question you need to ask your Real Estate Agent…that no one ever asks?Buyer Clients-1

Will you help another of your buyer clients buy a home…

that is perfect for me and my family?

MORE IMPORTANTLY…will you even take on a new client…

who has the same ojective as mine?

People often ask me if I am “taking on new clients” and the answer is yes…as long as you do not have the same objective as one of my existing clients. I have been wanting to write a post on this issue ever since an Agent stood up in a class I was teaching here in Seattle and said “I showed the house to NINE of my “Buyer Clients”…

What??? NINE of your Buyer Clients??? How the heck can you take on NINE clients…who all want the same thing, in the same place at the same price???

There’s a lot of talk about Agent Commissions being less, when the truth of the matter is that what we should be striving for is getting back to the reason WHY “we make the big bucks”. It is because we can only devote ourselves to the objective of a few clients at the same time, in order to eradicate any potential conflict of interest or dilution of our efforts on the client’s behalf.

I have a client who wants a condo in Downtown Kirkland for about $350,000…possibly a townhome in Redmond for the same price…but more likely a condo in Downtown Kirkland.

I have a client who wants to buy a condo 2nd residence/investment condo for about $125,000 in Kirkland, Redmond or Bellevue.

I have a client who wants to buy a primary residence for about $600,000 in the prime areas of Kirkland near Downtown.

I have a client who wants to buy a primary single family residence for $400,000 give or take (depending on condition of property) in Redmond…possibly Kirkland.

I have a client who wants to buy a primary residence in Seattle between the U-District and Green Lake for $500,000 give or take.

So the answer to “Am I taking on any new clients” is yes…as long as you don’t want the same thing as one of my existing clients as listed above.

When I speak with other agents…they wouldn’t dream of turning a client away…EVER. Which is why some of the lower cost “agent services” do not list “assistance with property selection” as one of their offered Buyer Agent services.

Most all websites say “CALL ME IF YOU WANT TO SEE THIS PROPERTY” without regard to whether NINE people will all call to see

the SAME property.

It’s really as simple as this. IF your agent will show the SAME house to more than one of their clients OR if they will even “take on” a 2nd client who has the same objective as you do, then they are a SALESMAN and not a true representative of your goals and best interests.

Ask the question. If you find anyone else who says “NO, I will not take on a new client who also wants the same kind of property, in the same place, at the same price as you do”…let me know.

It will do my heart good.


Further Analysis of a Real Estate Broker’s Ability to Represent Buyers*

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The method by which a real estate agent is compensated undermines the agent’s ability to represent his clients, particularly clients who are buying property. Before I get into the substance, though, I need to define the term “represent.”

Yes, the term is used in the “brokerage relationships” statute, RCW Chapter 18.86. However, I am unwilling to conclude that EVERY agent “represents” his clients simply because that’s what the statute says. In my book, “representation” requires more than the legislature’s decision to use that term in the statute as shorthand for acting as a real estate agent. Rather, I use the term to mean “to manage the legal and business affairs” of the client.

With that preliminary matter out of the way… Representation requires a high degree of loyalty to the client. Loyalty to the client is undermined by any interest that competes with the client’s interest, including self-interest of the person providing the representation (i.e., a conflict of intererst). Agents are paid by a seller, not by the client/buyer, and clearly there is a conflict of interest between the seller and the buyer. Moreover, the agent has no obligation to inform the buyer/client of the compensation paid by any particular seller. This system creates a serious conflict of interest that undermines an agent’s ability to represent a buyer.

Want proof? There is a general consensus that a seller should offer the “full” SOC of 3%. Correct me if I’m wrong in that regard. Assuming I am correct, this “general consensus” is de facto recognition of the reality that a substantial portion of agents put their own interests — getting paid a 3% commission versus something lower — above those of their client. If anybody believes otherwise I’d love to hear the argument, as this seems like a “slam dunk” point to me. There is simply no other explanation other than that an increased fee to a buyer’s agent will influence the agent to convince his client to buy the subject property versus some other. This influence over the buyer derives entirely from the agent’s self-interest to make as much money as possible, regardless of what may be best for the buyer.

The same logic is at work for a “bonus” SOC for a full-priced offer, which is permissible and not that uncommon. How on earth is it in the buyer’s interest to make a full price offer in this market? And in a situation where a full price offer is merited, it is merited because of the needs of the buyer, not the interests of the agent — or at least it should be if the agent is providing “representation.”

Want more proof? It is common for some listing brokerages to send a letter to the Selling Agent when a property is placed under contract. I recently received such a letter that reads as follows:

Knowing that selling a house at competitive market value can be a challenging process, I want to take this opportunity for professionally selling the subject property.

Wow! What an emphasis on “selling”! If an agent is truly “representing” a buyer, how is that agent “selling” the home? Those two terms are mutually inconsistent. A “salesperson” does NOT look out for the interests of the buyer. To the extent a “salesperson” claims to do so, it is — to a degree at a minimum, if not entirely — subterfuge to build a relationship of trust between the buyer and the salesperson, which in turn facilitates the sale. Does anyone really believe a salesperson when they say, “As a favor to you, I’ll…”. Salespeople sell, they don’t represent. Representatives in contrast look out for the interests of the client, they don’t work to convince the buyer to buy. Any decision to spend several hundred thousand dollars should be made by the client uninfluenced by the representative.

These are built-in conflicts of interest that undermine an agent’s ability to represent buyers. But even worse, these conflicts of interest are concealed from the client! The MLS refuses to reveal to consumers the SOC being offered on any property. Thus the buyer has no way of knowing that his “representative” may have a powerful self-intererst that is counter to the buyer’s.

Finally, I must note again one other example of how the system is inconsistent with an agent’s “representation” of a client. The client/buyer should have the right to select his/her own “representative.” After all, “representation” must arise out of a relationship built on trust. However, the seller’s SOC can be paid to ANYONE who sold the home, regardless of whether that person provided any representation at all. In other words, the fee paid is totally disconnected from the service ostensibly provided. Indeed, the fee is paid for a service — selling the home — that is INCONSISTENT with the service that the agent claims to provide.

In the final analysis, this state managed to get halfway to “buyer representation.” RCW 18.86 was a big step forward for buyers because agents now have at least some limited legal duties to their buyer clients (in the “good old days” EVERY agent worked for and had a duty ONLY to the seller, even if they only worked with a buyer). But they didn’t fix the underlying system. And that system seriously undermines the ability of agents to “represent” buyers.

To address this shortcoming, I formed Quill Realty. Every Quill client gets both an agent AND an attorney (and Quill pays the attorney’s fee). So Quill clients are truly “represented” in the transaction.

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* Following “competing” posts by me and Ardell, Seattle Bubble asked its readers to weigh in, framing the issue as “Real Estate Agents: Advocates, or Dead Weight?” Both Ardell’s “rebuttal” and SB’s “poll” muddied my point significantly. I recognize that there are really great agents out there who do fantastic work for their clients and who hold themselves to an ethical standard that far exceeds what is required of them by law. My point is that there are substantial flaws in the system in which agents operate, and these flaws undercut an agent’s ability to truly “represent” his clients, particularly on the buyer side. Consumers should be able to rely on a fair SYSTEM and should not be charged with responsibility for finding one of the “good” agents. Similarly, its unfair and inaccurate — and overly inflammatory — to suggest that agents are EITHER an advocate or dead weight. That’s hyperbole, not a fair comparison, and serves only to inflame the passions of the audience, which again obscures my point. So from here on out, its “clinical” titles for me only.

Why there is no “LATE” in Real Estate

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no crying in baseballWe all remember Tom Hanks in “A League of Their Own” and that great line “There’s no CRYING in Baseball!” That doesn’t mean it NEVER happens, that means it is not SUPPOSED to happen.

When it DOES happen it is usually a Joe Biden sized BFD!

Same goes for a Late Closing in Residential Real Estate transactions…with some exceptions. In a normal Residential Real Estate Contract, you put down Earnest Money WHICH YOU ARE SUPPOSED TO LOSE under certain conditions. People often don’t know this OR they forget this.

Most often agents probably don’t say “Oh, by the way you may lose that $10,000” while the buyer is writing the check. They just “assume” the buyer knows what Earnest Money is. Telling people they may lose $10,000 is just not something most agents like to say when someone is making an offer on a house. BUT if the day the buyer may lose it, is the first time they’ve heard of that possibility, the *chocolate* is going to hit the fan…and often does!

Earnest Money is the amount you ARE WILLING to lose if…

If you COULD NOT LOSE YOUR EARNEST MONEY we would not require Earnest Money as a “BINDER” in most Residential Real Estate Transactions. Still the minute the “you might lose your Earnest Money if…” situation comes up, people act like no one should ever utter those words. Odd…but true.

Buyers write those big, fat Earnest Money Checks without much thought to LOSING that money…until faced with the words “Your Earnest Money is NOW in Jeopardy”. Late closings enter that realm of possibility. Often that can turn into a “Let’s SHOOT the Messenger” knee-jerk reaction. But the reality is…someone, sometimes, has to be the bearer of that bad news.

So why IS the main rule  “No LATE in Real Estate

Do you need a “fancy” Flyer to SELL a house?

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Real Estate, cost of doing business, is often blamed for why “we” need higher and highest Real Estate Commission levels. As a follow up to my previous post I will tell you what I am NOT “good at”. That should make Craig happy. 🙂

I am not good at Bullshit! I seriously am just not good at “flowery language” to describe homes I list for sale. Never was, and will never be, my forte. If you have ever seen over the top flowery language on one of my listings in 21 years…the seller of the house must have written it, because I am sorely lacking in that “talent”.

I am very good at making “the product” the best it can be before it hits the market. I am better at “staging it to sell” than a stager, because I use staging to highlight the home’s best features. I am not “decorating” the home. I am putting up signals to the home’s features. BIG DIFFERENCE that I can’t seem to explain to “home stagers”.

The staging follows the Home Flyer pattern as to Best Features of the home.

When Making a Flyer I start with a list of why someone would or should buy THIS house vs the others that are for sale of like-kind home style. This home happens to be a “split entry”. So I look at it in relation to other Split Entry homes for sale within a half mile or so. Distance is not the key as much as having enough comparison product. If I can get that within .25 miles…that may be all I need. If I have to go out a full mile, then that is what I need. I want at least 3 to 5 On Market similar homes to use as a benchmark.

Here is the list of my “competition” for this particular home and product. Since it is now listed, the 2nd one on the list is actually this property. There were two others on market when I was preparing the listing and working through this process that are now pending. One was listed at $254,000 and the other for $267,000, leaving mine positioned as 2nd in “the pack” with the bank-owned as 1st, as it should be. We are “ahead of the pack” but not as low as the bank-owned home. That is “correct placement”.

Here is The Home Flyer:

Todd Flyer Picture of

As you can see from the flyer, I totally suck at “flowery language”. No words like “oasis” or “vista” or “exceptional” or “stellar”…just the facts. I’m very Jack “just the Facts M’am” Webb in that regard. A shortcoming, yes…but just how it is.

I had to re-design as in “downgrade” this flyer template to a one page, one sided, Flyer. I was using that fancy 11 X 17 folder over 4 page $3.00 apiece style flyer for awhile…and reverted back to this simple flyer as has been my long time custom. They cost $.39 apiece to print over at MinuteMan Press. They don’t bleed and sweat and run as to the ink like the ones I might print myself on an inkjet printer.

I pay for the “upgraded never ending flyer box” so one can be in the box at all times, even if people take them all, as one sits in the plastic cover in the front so people can see it even if the flyers are “out”. I think that costs an extra $2.00 for the life of the listing. 🙂 The sign up and down costs about $60 or so. One fee up front for both sign up and sign down. I paid a little extra for the Open Sunday 1-4 Rider to go up with the sign, vs my placing it there myself, so that it was an immediate announcement.

I do two Open Houses two Sundays in a row, back to back, and put it on the flyer.

Often the picture of the front of the house is NOT on the flyer, as noted above, as the person holding the flyer from the flyer box is usually standing IN FRONT of the house. He can SEE the front of the house and nothing else. So if I have room for 6 pictures, I want him to see the key selling points that he can not see from where he is standing.

The #1 feature of this house vs the newer homes in the area is the lot size, the big yard, the privacy trees, and the outdoor deck. These are the things WE have that the new, slightly pricier, zero lot line houses do not have. So I have devoted HALF of the photos to that aspect of the home that they cannot see when standing out front.

Back to staging for a second.

That is also why I removed some of the curtains, most all on the back of the house, and decorated “sparingly” so the eye would be drawn OUT to our best feature

vs IN to some overly nice furniture.

I am drawing the eye to the best feature when staging…NOT “decorating” a house.

Next of note as to FEATURES we have that the others in the lower price range and some in the higher price range in the list in the link above do not have is a NEWER ROOF and all NEWER WINDOWS. Pricey improvements for a buyer to make after purchase if they buy the other house that needs all new windows and a new roof.

So THAT is the number one item (both included) on the flyer below the price.

Back to Staging. I have NO curtains so you can see the full framing of the newer windows and sliding glass door as curtains are “prettier” but curtains cost ten bucks and new windows and sliding doors cost $4,000 bucks or so. So I want you to see the windows…NOT the “pretty curtains”.

You see how “staging” follows the Flyer as to Key Selling Points of the home. The staging highlights those features…it does not “decorate” the home. It UNVEILS the best Real Estate FEATURES of that home. You are not buying “the pretty furniture”.

Yes a cute rug would be pretty in the living room, but I am selling the hardwood floor, not a pretty area rug.

So there’s my weakness…I can’t talk about “Welcome home to your OASIS close to Freeway Access”. I don’t know if this should be YOUR home or not and I don’t know if you need an “OASIS” to run off to after work. I don’t know you at all. You are someone holding a flyer whom I will likely never meet.

I don’t want to tell you WHY YOU should or should not buy this house. I just want to talk about the house and it’s features, and make it easy to SEE those features if you come inside the home.

It’s my shortcoming…and I really don’t know what to do about it. But most of my listings sell in less than 90 days when I do this well, so I’m going back to doing THIS as I do it best. Blunt…straightforward, no flowery language.

Do Fancy Flyers with Flowery Language sell homes? I don’t know. You tell me.

Why Agents Are Better than Lawyers

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Craig’s written a few posts about Why Lawyers are better than Real Estate Agents. Seriously?
Are you KIDDING me???
 I usually don’t post before pictures of my listings, but this seller gave me permission to do so.

People don’t know what we do. because it is PERSONAL. What we do for our clients is never known until someone who thinks this business is EASY walks a mile in our shoes. THIS is what I do BEFORE I even START! The Listing won’t even be in the MLS until Wednesday.

I clearly EARN every penny I make, and not ONE of my clients have ever disputed that. I have never had a client who thought I “made too much” when representing them either in a purchase OR a sale in 21 Freaking YEARS!

Every day (and today on my most recent post) someone says agents do NOTHING.

Well I don’t call THIS nothing. It took day after day and many hours. Because I can’t “market” a home until I have a home “to market”. This is a $250,000 house and I am only charging 2% (because it is a 2X past client).

If you hired an agent who did NOTHING…
well, come on guys, whose fault is THAT?!?

BEFORE:

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AFTER – Not finished yet,

have another full day tomorrow.

NO…this is not a vacant home…This is what it looks like today before it is finished.

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Even staging the Linen Closet, the kitchen cabinets, the patio set out on the deck…you name it. Closets…anything a buyer will open and look inside.

And then some PISSANT will come along with a “Bad MLS Photo” post and complain that the light fixture is reflecting in the sliding glass door.

Don’t get me wrong…the seller is working his fingers to the bone too! This kind of transformation does not take ONLY one person. But I even personally, hand made the wall hanging in the dining room. I didn’t have anything “in stock” that was quite right and I wanted the largest 42″ X 42″ piece. I had this one:

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But I wanted a “mid-century modern” feel, so I went to the cloth store and covered it with this:

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And then I made a “Companion Piece” in cloth of the same colors and different design, and found the “starburst” mirror for over the fireplace that matched the circles in the cloth in the larger cloth covered.

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If you are an agent who runs in with your cell phone and takes a quick picture of the open toilet and toilet paper…THIS is what we DO or “cause to happen” and WHY we make “the big bucks”.

And oh…

BTW…

I didn’t see any LAWYERS in Joann Fabrics on 4th of July Weekend.

If you are one of my other clients over the last week or two who thought I looked a little tired…this is why. 🙂 A VERY rewarding business…and there is NO END to what “we” DO!

We do whatever it takes to have a successful client.

What’s Up with the Helicopters?

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No, it’s not Google gathering more information and it’s not Ben Bernanke making money drops.  Starting today, The Department of Homeland Security is funding a study to determine current radiation levels in King and Pierce County. Helicopters will be flying a low levels in neighborhoods from now until July 28, 2011 to create a “baseline” measurement.

From the Office of Radiation’s website:

The helicopter will fly a grid pattern spaced about 600 feet apart at an altitude of 300 feet, flying at 70 mph. The results will be provided to local agencies from the surveyed area by year-end. Some of the data may be withheld for national security purposes. The state Department of Health has been planning this project since 2009.

Something EVERY home buyer needs to know BEFORE they step on an Owner’s Property.

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looking in houseBefore you look at even ONE house, from IN or even ON an owner’s property, you need to understand the basic framework put into place before the home was listed for sale.

A “For Sale” sign is not a “license to trespass” on someone else’s property.

You are basically walking into the middle of a commission structure AND instruction for your being able “to see it” structure, that is already in place. This arrangement was set BEFORE it was listed for sale by the owner of the property, and that owner’s agreement with “the mls system” and his agent, before the For Sale sign was put in front of the house.

It is something you must comply with, and so something you need to FULLY understand BEFORE you step on or in someone’s private property.

This is true when you walk into any home that is for sale AND listed via an mls system. You do not have permission to go on or in  an owner’s private property, except via the owner’s permission or via an agent who is a member of the mls system. That includes opening the owner’s gate and going in their yard and peeking in their windows. There is no entitlement to trespass on an owner’s property just because it is “for sale”. Some think if a property is vacant and there is a For Sale sign out front, that gives them the “right” to trespass on the property and peek in the windows. It does not.

Without permission from someone with the authority to give you that permission…that is called trespassing. Those with the authority to give you that permission to step ON or IN an owner’s property, do not do that “for free”. You should not be going in or on someone’s property without understanding that you are paying for that privelege by doing so, as the structure to pay someone to let you on or in is already in place via the seller so that you CAN see it. You can’t ask to be on the owner’s property and then try to DICTATE that the seller CAN’T pay the person who provided that access for you.

That is not a FREE “service” and the seller has already promised to pay someone to afford you the opportunity to be on and in his property.

Below is a comment I made on Craig’s post to assist him in knowing what he can and cannot “promise” to give away.

If and when a Buyer includes a portion of “Do It Yourself – DIY” into the scenario to “save money”, they must do so without the “use” of agents…be that the Seller’s Agent or a Buyer’s Agent. Doing some of it YOURSELF…must be YOURSELF and not yourself in the room with an agent whom you do not plan to use to represent you in a real estate transaction.

IF you plan to use an Alternative Business Model or Traditional Agent who will PAY you for the portion you choose to handle “by yourself”, you need to hire them in advance of seeing any home. You also need to be certain that the portion of “rebate” you are looking to get is for work that YOU did with no agent contact whatsoever, outside of the agent you hire to represent you.

Below is the reason WHY, and also my response to Craig who asked the question in the Rain City Guide post previous to this one. Below is my comment, in response to his quandary, in its entirety.

“Let’s assume for a minute that there is a 6% commission set by the seller to his purpose of selling his home, of which the original referring agent (the Listing Agent) and the “Procuring Cause

Representation by RE Agents: Is That an Oxymoron?

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As we continue to build WaLaw Realty, I am frequently reminded of the tension between “buyer representation” and the realities of being a real estate agent. On the one hand, agents tout the importance and benefits of “representation.” A “representative” acts on behalf of another, the client, and protects the client’s interests. Needless to say, trust is an essential element of any representation.

On the other hand, agents are salespeople compensated by the seller for selling a home. These two roles are inconsistent with one another. A recent experience of mine illustrates the point. [Forgive my use of “s/he” as a gender neutral pronoun, but that’s a lot easier than avoiding the pronoun entirely.]

I was retained soley as an attorney to assist with a non-MLS purchase. As negotiations progressed, my clients realized that they might not reach agreement with the sellers as to the terms. Accordingly, to hedge their bets (they must move from their current residence) they began looking at homes listed on the MLS. To gain access to these homes, they contacted the number on the sign, the listing agent.

The listing agent indicated that s/he was busy but that s/he would send another agent to provide access. My clients assumed this was an associate of the listing agent, and the listing agent was taking steps to provide access as part of the job of selling the home. The clients were interested in two homes listed by the same agent, and the “associate” provided access to both, only one of which was suitable for my clients. Total time: Approximately one hour. At the end of the tour my clients informed the showing agent that they intended to use my services if they wanted to move forward. The showing agent did not mention that she was totally unrelated to the listing agent and would have a potential claim on the SOC if the clients purchased either home.

The negotiations collapsed on the first non-MLS transaction, and the clients decided to make an offer on the MLS-listed home. Accordingly, they then hired me as a real estate agent. As my web site makes clear, I rebate the SOC to my client in full (after payment of my flat fee and any additional fee incurred by client). Commission rebates to buyers are quite common and I am certainly not the only broker to offer it. Recognizing the possible claim, I contacted the “associate” who provided the initial tour of the home.

The “associate” was actually another agent working under a different broker in a different firm. The listing agent frequently refers new business to this “showing” agent. Because I cannot rebate a commission to which some other agent has a claim, I asked the showing agent if s/he was going to assert a claim on the commission (as the “procuring cause”). The answer? Yes I am! But as a compromise s/he offered to accept 30% of the commission, a typical referral fee. With a sale price of about $700k, s/he wanted $6k for the hour of work.

The story is still unfolding, so I can’t tell you how it ends. But I CAN point out that this claim on the commission is 100% inconsistent with any notion of “representation.” Again, that relationship is built on trust. At an absolute minimum, the showing agent should have explained the fact that, by opening the door, s/he may be entitled to the SOC. The failure to do so was not consistent — at all — with trust between an agent and a client.

I’m curious to hear some counter-argument. It seems to me that agents have been remarkably successful in having their cake and eating it too. They tout the importance of “representation” only to completely ignore basic principles of fairness to the client when its in their interest to do so. They’ve sold the public a bill of goods, because to agents “representation” is ultimately a means to an end, not an end unto itself. But then again, they’re salespersons, selling is what they do, and why they get paid in the first place. Its not about representation, its about sales. And the phrase “representation by a real estate agent” doesn’t make much sense at all.

Are the “Cash Call” Radio Ads Advertising a 10 Year Fixed Rate Mortgage Bait and Switch?

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I listen to 97.3FM and am a longtime listener of Dave, Luke, Dori (accidentally listening since 1995), Ron, Don, John, @thenewschick and @joshkerns38. I am so sick and tired of hearing the Cash Call radio ads that every time one of the ads run, I switch over to satellite radio and I’ve been meaning to write this blog post for many weeks so here it goes. 

Radio listeners: There’s nothing inherently wrong with mortgage companies that advertise on the radio. This is one business model of many but realize that radio ads are not inexpensive and there are a few ways that a mortgage company can pay for their advertising. One way is to charge you higher interest rates.  But wait, how could they do that when they’re advertising low, low mortgage rates? 

The answer is one you will not want to hear but I’m going to tell you anyways:  The rates advertised are likely NOT the rate that you will get.  The rate advertised is for a loan program that only a very small percentage of people will qualify for.  People with credit scores above 740. People with lots of equity in their homes, people who want a 10 year mortgage, or in the case of Cash Call, people who ONLY live in the state of California.  That’s right, the radio ad that’s running in Seattle comes with one caveat: It’s only avail for California borrowers.

To their defense, the Cash Call radio ad airing on 97.3FM does state that the rate and APR advertised are for a 10 year mortgage but realize that only a very small percentage of people calling that firm will end up with a 10 year mortgage.  This might come very, very close to a classic bait-and-switch scheme without crossing over the line but we don’t have enough facts to make that determination.  For example, one of the facts we’d need is to know how many people who called in actually chose a 10 year loan v. a 30 year fixed loan. So instead of selling a bunch of 10 year loans, the reason for their radio ad is to motivate radio listeners to pick up the phone and call after hearing the low rate and APR.

So, who’s on the other end of the phone?  The answer shows us another way companies that advertise on the radio make money. 

Any consumer who is curious about the licensing status of their loan originator can use the Nationwide Mortgage Licensing System’s Consumer Access website to check on the status of a mortgage company or individual loan originator.  When searching for the company name CashCall you’ll see many, many licensed LOs, okay that’s good. But dig a little deeper and you’ll notice that each person’s employment history contains many months of unemployment right around the subprime meltdown and lots of jobs held at subprime shops or other companies that only do radio or TV ads…Ditech, Amerisave, Countrywide, and other low wage side jobs outside of the mortgage industry.  That leads to the second part of how these companies make money advertising on the radio.

If they can’t offer you the lowest rates they’re advertising, then another way to make money is for the radio-advertising mortgage company to pay their staff a really low fee.  This is justified by the firm because…the company is making the phone ring! All the LO has to do is sit there, answer the phone and close the customer.  This is loan origination at its worst and if you don’t believe me just simply google:  Cash Call Complaints or Quicken Loans Complaints and see how many dis-satisfied customers they’ve left in their wake.

Homebuyers and refinancing homeowners should be wary of ANY mortgage lender that operates out of state and has no physical prescence in your state. 

Homebuyers and refinancing homeowners should always check the licensing status of their loan originator here and if their LO is not in the NMLS system ask WHY and ask to speak with their manager. Mortgage brokers and non-depository mortgage lenders must license their LOs. Depository bank LOs begin registering their LOs within the NMLS system this year. Maybe the person on the phone calls himself/herself an intake specialist or a loan arranger. Ask to speak with a Licensed LO. If there are no licensed LOs then you’re probably dealing with a lead generation company and I’ll do a serious smackdown on lead gen firms in another blog post.

Companies like Cash Call and Quicken hire the loan originators who have no client base, don’t want to work hard enough to earn repeat business, only work part time, will work for a low wage, and/or are paid to close deals and not serve the best interests of their clients.  Do you want low rates? Go ahead and use one of these companies but you should have extremely low expectations of your rate being as verbally promised or the transaction closing at all. Expect pain and suffering. Some people pay extra for that, but now we’re getting off track.

Do you want your transaction to close? Select a loan originator based on his or her experience and knowledge. Choose a local company with a loan originator located right in your city so you can go into the office and meet with him or her face to face at application.  Yes, this will take time. Do you want your transaction to close and also get a fair interest rate? Then that means you will have to invest some time into understanding your options and understanding the documents you’re signing and that means human interaction whether that’s phone, email, text or facebook messages.  You will need someone to respond to your questions who knows what they’re doing.  It is impossible to be a part time loan originator and serve your clients efficiently because there are far too many changes taking place on a daily basis. 

Kiel Mortgage radio ads are great. The radio ads from TILA Mortgage have improved over the years.  Best Mortgage’s ads are fine.  These are all LOCAL Seattle area companies with local loan originators and company owners who have been serving homebuyers and homeowners for decades.

I notice that on the Cash Call website, and on KIRO 97.3 FM, they’re advertising a “no cost” mortgage loan.  Folks, there is no such thing as a zero cost loan.  It doesn’t exist unless you’re doing a straight interest rate reduction refinance with your same lender, going through that lender’s loan servicing department and I think it’s even rare that that would happen nowadays with so many banks and lenders immediately selling everything to Fannie Mae or Freddie Mac.  Mortgage loans will always have fees and costs involved.  Some of those fees will be to the bank funding the loan, other fees will benefit the loan originator helping you, and still more fees will go to third parties.  Any company that tries to sell you a “no fee” mortgage loan is lying to you. The fees ARE being charged….they’re just being covered by a higher rate or they’re not telling you about the other third party fees that you’ll pay at closing unless you decide to read the fine print. 

So the opening call-to-action phrase on the Cash Call home page is a lie, the radio ads are deceptive and their loan originators are sub-par. I’m sure they’ll make several billion dollars this year, pay a very small percentage of their profits in regulatory fines, and keep on using the radio to find more rate shoppers.  It’s a business model that works. Expect more copycats.