Category Archives: General

Inspiration is everywhere if you decide to let it touch you.

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There is nothing better than an underdog. Meet Paul, a phone salesman from Wales. This will blow you away. (need sound for You Tube)

The gentleman below inspires me everyday I drive to work. He is disabled and uses a broom to help support him and keep himself from falling while on his way to Walgreens. The beauty of it is that he sweeps EVERY inch of sidewalk or street in his path. It probably takes him about 2 hours to walk the four blocks round trip and he is smiling every inch. Look close at the photo on left and you’ll see the up-swing of his broom.
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When I feel like I’m not positively impacting the lives of 23 kids I coach in soccer or the stresses of work or family (extended or close ) gets us down, I look for ways to be inspired. It’s everywhere if you let it touch you.

Home Owner Quicksand

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If you own real estate beware. Last Wednesday, Russ Cofano wrote of new changes to the Washington Contractor’s Registration law that were made this summer. The real estate investment community is in shock that a change in definition of who must be a contractor with ramifications this drastic, slipped by in the guise of consumer protection. 

Although this applies to the ‘fix and flippers’ and you may think they need to become contractor’s in order to protect the public as they make a profit on the real estate they buy, fix and sell, don’t be too quick to applaud this new change.

In fact, ALL real estate owners, including owners of only a primary residence, should be equally as shocked as this definition appears to affect all property owners and not just investors.

The repercussions of this law go deep and have dire consequences.  As many of us understand the law, any homeowner that does any repairs and maintenance or remodeling to a home in anticipation of a sale within 1 year MUST BE A CONTRACTOR. Suppose you have a sale on your home, you have an inspection and you must now repair a few items.  What we believe this new definition maintains is that you, the homeowner, MUST BE A CONTRACTOR.  How impractical is this given that a contracto’s license requires a $12,000 bond, unless the homeowner has sterling credit in the area of 760 and can get insurance for the bond.  Even with that, the cost of the contractor’s license, insurance and bond  would be around $3000 or higher not to mention, the time that would be required to get a contractor’s license.

At the REIA (Real Estate Investors Association) monthly meeting on Monday night, even the 2 attorneys invited to explain the consequences of this new definition, were at a loss.  Neither wanted to take a position as neither had yet spoken with the Department of Labor and Industries who will enforce the law.

Can you imagine every homeowner needing a contractor’s license who a: has work orders persuant to a sale or b: remodels their, say bathroom, prior to putting their home on the market, or c: does maintenance or remodeling work on their home prior to renting it out within the year. Any of these instances could require a contractor’s license.

The investment community is wondering what this all means. Many investors purchase homes through their retirement accounts through self directed IRA’s or other LLC’s or corporations.  Does this law mean that the LLC must be a contractor, or does it mean that the owners of the LLC must be a contractor or both.  In the case of the self-directed IRAs buying real estate, there may be prohibited transactions if either the LLC or the owner of the IRA become a contractor.

My question is, where was the Realtor’s Association when this was enacted and why didn’t they alert us all.  I will find that out. It’s my understanding that they were directed to take a no opposition stand.

I hope this all works out in a reasonable manner. We’ll see.

6 Interesting tidbits from around the web

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  1. Seattle is doing a lot of recycling and New York is listening. Did you know that it will soon be illegal to throw away food scraps? At Chez Ward we feed food scraps to the red worms in the bin so we don’t have to pay the city to haul our scraps away and then pay again to get them back.
  2. The DOJ released a website all about real estate commissions yesterday (beware the Inman paywall tomorrow!). We can argue all night and day about whether agents as a whole are “worth” 2.5-3%, but I’ll tell you this right now: some Realtors are and others are not. The DOJ says that an amazing 70% of home sellers negotiated the commission with their agent. Maybe the DOJ should set up a site on divorcing commisions or the frickin’ health care system, where rates have gone up a lot more than a few percentage points a year. OK, maybe this warrants its own post.
  3. Only “20% to 25% of the homes shown on the Internet (depending on your information source) use home tours and/or multiple photos … It indicates apathy, arrogance, negligence and many other bad words.” No points for trying; all extra photos must make the process of selling the house better, not worse.
  4. Apparently banks are even less rational than sellers about home values in a slow market. Teresa Boardman:

    “They often hire Realtors, but banks make lousy clients … Buyers need to understand that when making an offer in a bank owned property it can take weeks to get the offer presented and then accepted, or rejected. They don’t seem to negotiate offers like other sellers do, they just accept, or reject and wait for a better offer.”

  5. Huzzah is a real word. Wikipedia says so.
  6. Lowell Elementary school ranks better than any other school in Seattle (using standardized tests scores). I learned this while ironing a bug out of Estately’s new Seattle real estate page. And I think I just broke the rules.
  7. Bonus: the past tense of help is holp. Anyone who says otherwise is decimating the language.

Department of Justice Speaks Out

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[photopress:doj.jpg,thumb,alignright]This website put out by the Department of Justice’s Antitrust Division is…Oh MY GOD!!!  It’s almost an indictment of the entire industry!

Most of you know about the lawsuit that is still ongoing filed by the Department of Justice against the National Association of Realtors.  There are a few other cases as well, noted on this website.

Based on the entire content of this site, which is well worth your time to peruse, it seems the DOJ is taking a stand whether they win or lose in the individual suits.

It’s a Call to Action.  Will the Industry respond accordingly?  Quite an amazing site!  Portions appear to have been written by Glenn Kelman 🙂

*******

Added to post from comments below.  What can Brokers do to help the DOJ’s efforts:

There are many things that Brokers can do to help.

1) Remove all commission language that reduces the mls offering to the Buyer Agent, if the Buyer Agent is not present when the buyer first views the property. In fact, I think the mls should not permit these clauses, as they are not being uniformly enforced, and in fact may be totally unenforceable.

2) Remove all minimum commission language directing agents with regard to agent client commission negotiations. While a Company can set a minimum amount that the agent must pay to their broker, they should not control the amount an agent can negotiate with a client.

Don’t you think it’s a bit odd that many agents will not pay a Broker for a whole year, what they would charge some clients for one move out-move in?

3) Clearly no Broker should permit talk within their office against any new business models. No talk about not showing certain property. No talk about how to combat the intrusion of certain business models on their income stream. In fact, I will not talk about commissions en masse at any office meetings.

I will meet one on one with any agent to discuss their individual goals and business plans. I can further discuss the amount the Company expects that particular agent to pay to the Company in a year’s time. But I will not discuss commissions as general policy, nor tell them what commission they must charge their clients.

Each agent is their own business. So any company that binds these separate businesses together as one commission model, is hindering competition in the marketplace. I know that’s a different way to look at it. But it’s true. No Company should have a policy that addresses in any way, the commission dollar that is not staying with the Company.

Neighborhood round-up serves up with Salmon…

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One tough salmon on Ballard Avenue ….and Salmon days over at Issaquah Undressed is wet for everyone!

Help with “personality” wanted at Ballard’s Nervous Nellie’s as “advertised” by At Large In Ballard , and Mid Beacon Hill waves “buy-buy” to the Boeing Store that will soon take off on it’s final flight.

West Seattle Blog and a trip to West Seattle Farmer’s Market.  Missing on Beach Drive Blog…the mysterious Sunset Bagpiper….

Broadway Seattle on Capitol Hill is soliciting for a “hip” and “fun” neighborhood name.  CHS on Capitol Hill proposes a “brilliant” new revenue generating scheme…umm, idea.  

Northwest Film Forum festivities over on Capitol Hill , and ABC’s Extreme Makeover works its magic for a Kirkland family over at Kirkland Weblog.

Controversy over at High Point Blog in the “Tale of Two Cities” and some political incorrectness brouhaha.

Week 41 over at Kirkland 52 highlights Fall’s fallen, and a yummy Fall treat…sippin’ spice returns on SammaMishmash.

 

 

ZOLVE.com – Another RE Network

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[photopress:et.jpg,thumb,alignright]On Sunday I had the opportunity to interview Brian Wilson who is today launching yet another Real Estate “Social” Networking platform, ZOLVE.com

The press release states it is “the industry’s first and only”:

COLORADO SPRINGS, COLO. – October 9, 2007 – Zolve today announced the launch of the first online network for real estate professionals. Zolve is the industry’s first and only online real estate network designed to help real estate professionals streamline the client referral process and expand their spheres of influence in order to do more business.”

We all know it isn’t the first, but it may be the first to charge for the privilege of being a participant.

“Zolve offers a 30-day, risk free trial. During the first year of operation, Zolve membership is $395, a discount of $600 from the list price of $995 per year or $99 per month.”

The interesting part of this story is that Brian dreamed up the idea after being deployed and while serving in Baghdad.

The more I spoke with Brian, the less I got the impression that it was like Facebook or Linkedin, the two names he mentioned the most during the call. I said, Brian, it sounds more like a network that would have been started based on a designation like CRS. A place where agents with a CRS designation could find other CRS designated agents.

He said, well ARDELL you kind of “nailed it” in that I DID start with fellow CRS designees. I asked how many of the 2,200 pre-signed members were CRS designees. Brian replied ALL 2,200 of them hold the CRS designation.

Given that fact, one might sign up now in case the current participants assume that all are CRS designees. Just sit quietly in the closet like ET, hoping to blend in and be chosen by association. Though I think it might have been more valuable if holding the CRS Designation was a requirement of membership long term. With all of the Social Networking platforms springing up everywhere, perhaps an exclusive group would have more appeal.

The referral fees are exchanged broker to broker in the selection process, and not shared in any way by the ZOLVE owners. While it is being touted as a place for agents to find other agents, I think its value will lie in buyers and sellers being able to view the members directly.

Everyone can find most agents online all by themselves. Shouldn’t the process of an agent getting 25% or more of the commission for telling another agent about someone who is interested in buying or selling a home just go away? Shouldn’t companies like Microsoft let their new hirees from around the Country go to one of these sites and pick their own agent, instead of charging the agent 35% or more so that the Company can choose an agent for them, to help defray the relocation costs?

Still the question begs to be answered. When will technology benefit the buyers and sellers directly? When will the machine that keeps the commission high so it can be split up into various slices, fall by the wayside? When will the buyers and sellers be able to take that same 25% – 35% or more for themselves, by entering into sites like ZOLVE and choosing their own agent.

Why can’t they “refer themselves” and take the same money an agent is more than willing to pay to another agent, but not to their client direct?

Until new and more sites evolve that create better and cheaper options for consumers, these sites like ZOLVE are just another way to perpetuate same old, same old. All the commission dollars being kept high to support the good old boy agent to agent palm greasing.

So a real estate broker, this one sitting in Baghdad, dreamed up yet another way to profit off agents paying each other for an introduction to a buyer or seller of real estate, adding yet another layer of cost for the consumer.

Better to have used that “think time” to find a way for buyers and sellers to pay a small fee to enter the site, choose their own agent, and take 25% of the commission into their corner.

Referral fees should go away. Yet another site to perpetuate referral fees is using Web 2.0 for the wrong reason.

Are you really preapproved or just prequalifed for a mortgage? Part 1

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There’s quite a difference between being prequalifed for a mortgage and preapproved.   The letters that Loan Originators provide when requested for a prequal or preapproval may appear very similar.  In fact, I’ve talked to borrowers on the phone who thought they were actually preapproved, when all they really had was a Good Faith Estimate from a lender.  A Good Faith Estimate is just a rate and fee quote–an estimate is not a commitment to lend and does not indicate that someone has been prequalified.

Getting prequalifed is the stage just before becoming preapproved with a lender.   It’s a good start.  This is a great way to learn about a Loan Originator and to help you determine which Mortgage Professional you’re going to select to assist you with financing one of your largest investments.   There’s no strings attached yet to the lender, you’re investing a little of your time and perhaps a few bones for a credit report.   

The prequalification process help you determine:

  • What your mortgage payment will be
  • Available mortgage programs
  • How much home you can afford
  • How much money you will need for the down payment and closing costs
  • Your opinion of the Loan Originator (what is their skill level, knowledge, experience, available programs, etc.)

Once a prequalification is complete, you or your Real Estate Agent can request a Prequalification Letter that may be used for presenting an offer on a home.   A preapproval letter is stronger, however, a prequal can help buy you some time until a true preapproval is possible.  

When a buyer is prequalifed, this should mean at the very least, the LO has obtained their income, assets (down payment and additional savings) and credit information.   This can just be verbal—over the phone.   The information that you have provided is not necessarily verified (if you have not provided your W2s, paystubs, asset accounts to your LO, you’re definitely not preapproved).  If your information has not been ran through underwriting, you are not preapproved.  It’s possible that you have provided your supporting documentation and that the LO has submitted your information to underwriting and you may still not be preapproved, or you may be “preapproved with conditions”.

Sometimes home buyers need a little elbow grease or significant documents are still required and you don’t want to disclose it on a preapproval letter.   In this case, a prequal letter may better serve the client to buy them some time (if the listing agent will accept a prequal letter).

At the minimum, a prequal letter from a Loan Originator is simply confirming that an interview has taken place between a potential buyer and the LO.    When I write a prequal letter, it will state something along the lines of:

“Dear Agent, This letter is to certify that based upon preliminary information,   Ima Buyer has been prequalifed for conventional financing from Mortgage Master Service Corporation to purchase a home with a sales price of $375,000.   A full approval is expected after receipt of the Purchase and Sale Agreement and other documentation.  

This prequalification is based upon final verification of information supplied by borrower.  A satisfactory property appraisal & clear title must also be furnished to the lender prior to closing this loan.

Should Loan Originators Retract Preapproval Letters?

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Someone interested in buying a home interviews a couple of Loan Originators and selects one to become preapproved with. The Loan Originator meets with the buyers and takes a complete loan application, reviews their credit and obtains all of their documentation. The LO provides the buyers with all of the possible mortgage scenarios and they select which program is best suited for their financial goals. The LO then submits that loan scenario to their processor and/or underwriter for loan approval. (With our current market, I am submitting all supporting documentation to the underwriter to sign off on before issuing a preapproval. Before August, I would review the findings with the borrower’s supporting documentation and a majority of the time, I would issue the preapproval letter without underwriter review. I’m not taking any chances).

The Buyers are very excited and write an offer on a home with a real estate agent that the LO has not worked with before. The real estate agent uses the LO’s preapproval letter when submitting the offer to the Listing Agent and Sellers. The offer is accepted.

A few days later, the Buyer emails the Loan Originator and says, “Gee thanks…we’ve decided to go with the real estate agent’s preferred loan officer