So, what is your latest Christmas wish?  Somehow, I doubt that it’s A Christmas Story’s Red Ryder BB gun.  But, who doesn’t look forward to opening what’s under the tree?  For many, Christmas is a time of celebration and renewal.  Both, spiritual and personal.  A wonderful opportunity for family to get back in touch with one another.  For cards from distant friends.   And, for others, the focus of the holiday is on giving. 

What if we all were more like George Bailey?  You know, Jimmy Stewart’s role in the Christmas favorite, It’s a Wonderful Life.  The movie’s main character, whose dream was to travel the world, but never quite got there.  Instead, he was continually helping others less fortunate than he.  With money, and time, and his tireless efforts.  He certainly gave more than he got.  Wouldn’t you agree?  Of course, George Bailey was a movie character, not a “real” person.  But, if he was, who would he be?  Do you know someone who fits his description?  What about you? 

As this year draws to a close, I’m reminded during this Christmas season of giving, that whether fulfilling our duties as professionals, as Realtors, we have a responsibility to give more than we’ll get.   And while there are those transactions that make us all wonder why we ever chose this profession, looking back, it’s easy to realize the benefits clearly outweigh the challenges faced.  Let’s hope that the case for many of us. 

Merry Christmas!     

And, as I’ve said previously in this blog, when there’s any show on the ground in Northern Virginia, driving on our roads is akin to bumper cars lite!  While that might be a bit of an exaggeration, it’s not far off.  From what the local weather channel says, yesterday’s snowfall surpassed the record level that occurred in 1932.

Of course, for many of us, being house bound isn’t something we’re used to.  Most Realtors, after all, are out with clients on the weekends.  So, the forced confinement is probably what I needed!  Life’s like that sometimes, don ‘t you think?  Forcing us to do things we otherwise wouldn’t.  Perhaps there is something to an overall design to this life.  Hmmm, I wonder if….on second thought, perhaps we’d better not start down that road.

So, are you going to be lucky enough to have a white Christmas too?  We’ll, while the snow’s here, I might as well head outside and have some fun!

Robert Louis Stevenson

Is a Federal Housing Administration(FHA) crisis on the horizon?  With FHA’s insurance reserve ratio falling to the lowest level in history, at 0.53 percent, there are some who believe the FHA is the next subprime crisis waiting to happen.  One of those is homebuilder, Toll Brothers Inc., CEO, Robert Toll.   Toll predicts that just like the failed bank bailouts, the FHA will be next in the handout line.  And, with the reserve ratio as low as it is, he may be on to something.  According to a Congressional mandate, the ratio should be no lower than 2.0 

In addition to the alarming FHA news, this week’s Wall Street Journal reported that nearly 25 percent of all homeowners are upside down with their home mortgage.  In other words, they owe more on the mortgage than their home is worth.  Well, considering how values have fallen since ‘05, that isn’t too surprising. 

While the recent encouraging national home sales figures provided us a glimmer of hope amidst the current economic downturn, today’s sobering news concerning the viability of FHA home loans, and the depressed values of properties, bring us back to reality.  So, what are we to believe?  Are things getting better?  Is the First Time Homebuyer’s Tax Credit frenzy skewing sales numbers, or, are increased home sales “genuine”?   Are these numbers more akin to a mirage?  Instead, are we stuck in an economic tailspin for months, or years to come?  

In the competition to provide us the latest and greatest updates on where the economy is heading, we see indications that are both promising and discouraging.  Where the housing market may be going, we don’t exactly know.  But, fortunately, one thing is for sure, there will be homes both bought and sold.  So, perhaps we’d best stick to the present, and as they say, the future will take care of itself.  After all, as someone once said, “Predicting the future is easy.  It’s trying to figure out what’s going on now that’s hard.”  

Other than the dramatic shock to financial markets during the year following the height of the housing market and subsequent rapid fall in home prices, the sales market has been fairly predictable.  Once lenders got a grip on the deluge of foreclosures and short sales, and this glut of properties began to be adequately handled by them (O.K…so, they’ve still got problems with Short Sales, but they’re getting there), the housing market has been relatively stable.

Today’s latest news on the surge in home sales isn’t news to those of us in the business.  As one prospective home buyer in the latest USA Today article mentioned, the market is “insane….I’ve never seen a market like this before.” 

That, after having finally securing a home following unsuccessful offers on 20 Las Vegas homes.  And, while the rush to “get in” and take advantage before the First Time Home Buyers tax credit offer expired can partly be credited with the robust sales numbers, it doesn’t hurt that home prices, in many locations nationwide are 30-50% less than they were in 2005, or that interest rates are rock bottom.

Many believe that home prices have stabilized.  But, with more foreclosures and Short Sale properties landing on the market weekly, we may not have seen the bottom quite yet.  With extension of the tax credit, and mortgage rates in a low holding pattern, the surge in home sales numbers may, if we’re fortunate, become a trend instead.

 It isn’t the lack of training, or the contract documents, or the difficulties with foreclosures or short sales (don’t get me wrong, everyone is frustrated with the lack of standardization and regulation of short sales), but by a wide margin the complaints are centered on the lack of professionalism in the business.  I know, the phrase “lack of professionalism” can mean any number of things.  But, for our purposes, let’s break it down into four areas, 1)  Honesty; 2)  Answering inquiries;  3)  Lack of knowledge;  4)  Poor customer service.

While each of these areas can examined a bit more closely, for the purposes of this short article, assuming these are true, why is this tolerated?  What is it about the real estate profession or culture that encourages these?  A good place to start might be with the barebones and inexpensive prerequisites required to get a license as an agent.   

According to the Virginia Code, 60 hours of classroom (distance learning works as well) in the principles of real estate, and passing the state and national portions of the salesperson examination is what’s required for licensing as an agent.   Do those 60 hours include any training in Ethics?  Are prospective agents required to memorize the national Association of Realtors Code of Ethics?  What about their Standards of Practice that practicing Realtors are bound by?  Do aspiring Realtors have to be familiar with the Standards they are obligated to follow as practitioners?  Or, are the Standards simply picked up piecemeal along the way?  Apparently that’s the status quo.  And, if that’s the case, what’s needed to change the way we do business? 

Transformational Leader

The real estate profession needs leadership that will change the culture and the marginal “accepted” practices of its members.  Changing the culture or accepted norms of any organization requires leadership that has vision, demands excellence, and is willing to make tough decisions.  These hard choices demand more than the usual “care taker” type leaders we’ve come to accept.  What’s necessary, is a new breed of leadership that models the professional disciplines of competence, quality performance, and moral courage.  The new leadership needs to be nothing short of transformational, establishing a vision for a higher standard of performance, and demanding accountability.  

Real estate has witnessed a number of changes over the past few years, many of those due to technological innovation, and the new business models that benefitted from them.  And, in many ways, we’ve enhanced the product we provide our clients.  But we’ve only touched the surface of what’s needed to improve our profession.  It’s now time to work on skill sets and the character of the practitioners.  And, to make that a reality, we need leadership that is more concerned with the quality of our business than the quantity.  

Are our leaders ready to meet that challenge?     

But, for real estate professionals, where does ”leadership” come into practice?  Do we lead anything?  Are we led by anyone?  The obvious answer is, of course leadership is practiced.  And, yes, there are indivduals leading us in our profession.  But, if that’s the case, what kinds of leadership do we see?  Are they leading us in the right direction?  And, who is leading who, to do what? 

What Does Leadership Look Like In the Practice of Real Estate?

As real estate agents, our job is advise, counsel, and, among other things, educate our clients.  At the end of the day, we are paid to influence or persuade.  Is that leading?  Of course it is.  As most of us would agree, leadership is the practice or art of persuasion.  The ability to lead is based upon the faith or thrust that those being led have in their leader.  Aren’t our clients trusting us when we advise them on market conditions or price?  How about when we make recommendations to sellers on staging their home or preparation needed before placing it on the market? 

What is their faith in our capabilities based upon?  A positive history with us as a previous client?  In the case of a new client, what leads them to place their trust in you as an agent?  Was it your amazing marketing presentation?  And, what about buyers with their new agent, what is the basis for the selection of agent?  A recommendation from a friend?  The agent’s track record?  Good interpersonal skills?  Does it really matter?  When all is said and done, isn’t it the result that’s most important?  While the result is certainly very important to the buyer or seller, how the agent leads is sometimes more important than what the result is. 

Agents are considered to be ”independent contractors“.  One of the benefits that comes with that capacity is freedom.  Since independent contractors aren’t “employed” per se, but instead, work for themsleves, they are free to operate under their own set of rules.  Within limits, of course.  They are bound by the professional code or operating guidelines of their profession.  For Realtors, these guidelines are the Realtor Code of Ethics and Standards of Practice.  And while Realtors are well aware of what they should or shouldn’t do, most of their clients aren’t.  In other words, in  most cases, they wouldn’t be aware of misconduct by their agents unless it hit them in the face.  And to be honest, while Realtors take pride in what the Code stands for, sometimes their practice of it leaves something to be desired.

How are Realtors held accountable for the practice of their profession?  Do owner/brokers hold their agents accountable for their lack of professionalism or malpractice?  If so, how?  Do these brokers consider it more important for those new agents to get out and sell houses as quickly as they can, or to be well grounded in their Code of  Ethics? 

More importantly, if the Code is the cornerstone or building block of the practice real estate, how familiar does an agent have to be with their Code of Ethics before they are given a license to practice?   In other words, what are those in leadership positions in the real estate profession requiring of their community of agents?  What example are they setting and what standard are they accepting from those they are leading?  

In real estate, like other professions, there are those sitting in leadership roles that are simply placeholders.  Normally they’re in the position for affirmation and little else.  Certainly not to seek change, and God forbid, to make waves!  I’m reminded of a former classmate of mine from a recent leadership program, who, when asked why he was there, responded, “To check the block”!  

There are those who believe that our leadership challenges aren’t much different than those of other professions.  But, instead of minimizing the difficulties we face, perhaps we need to be asking instead, how we can transform our profession to one that is second to none when it comes to the public’s trust, instead of one that’s on par with Used Car Salesmen, according to Donald Trump.  

But, let’s not get the cart before the horse.  Before we take a look at some sugggested avenues of improvement, let’s take a look at some anecdotal evidence on where the real estate ethical compass rests today.  We’ll begin that examination in our next blog entry. 

Today’s market landscape looks very similar.  As they say, the players have changed, but the “song remains the same.”  Much like then, the multitude of today’s bargains comes in the form of foreclosures. 

 While there’s been much in the press about the the ugly side of foreclosures (owners destroying the property, evictions, mold, etc), many foreclosures on the market are in excellent condition.  Very much like the condition they were in when purchased at the height of the market in 2004-2005.  Yet, many of these properties are purchased for 35-50 percent lower than what the current owner paid for them.  And, in a few cases, even cheaper.  But, how do you find these properties before the competition?  How do you level the playing field with the investors that have been in the business for years? 

While there is no full proof method for success, there are three important steps that dramatically improve your opportunity to successfully purchase foreclosed properties.

The Steps to Success

1.  Identify the property the first day it’s listed for sale on the Multiple Listing Service (MLS). 

Better yet, locate the property before its actually foreclosed on.  many of these properties have been on the market prior to foreclosure, as a resale of short sale.  If this doesn’t result in a sale, they’ll be ripe for the pickin’ at the lower foreclosed price point.  But, once they’re on the market as a foreclosure, it is, as they say, “the early bird that gets the worm.” 

Seeing it on day one of its listing on the MLS probably depends on getting that information from your Realtor.   So, hopefully, your Realtor has set you up with a direct feed of Foreclosures.  Most MLS programs now offer the Foreclosure option.  If that’s the case, have your Realtor provide you an automated feed of new Foreclosures on a daily basis.  While this step a must do if you expect to catch the listing on day one, the second step to successfully getting the foreclosure you want is equally important.

2.   Strike quickly. 

Submitting a contract as soon as possible is vital to getting your contract accepted.  As I discuss with my buying clients, during the contract process, we take things one step at a time.  Our goal is to “get to the next step.”  By that, I mean that we take things one step at a time.  In the case of a foreclosure, we want to have the first contract submitted.  The sooner we submit a contract, the less opportunity we give competitors to do the same.  Multiple contracts are NEVER in the interest of the buyer.  The preparation or due diligence necessary to protect my buyer should have been done ahead of time.  Things like looking at comparable properties, neighborhood issues, history of the property, unpaid liens, should be done prior to the offer.  But, many of these can be examined prior to the submission of the contract.  Another key to securing the property is the terms the buyer is asking for.

3.  Make it Easy For the Seller

If your goal is to buy a foreclosure, many pruchasers are looking for as little work as possible.  For REO, or bank owned properties that are on the market as foreclosures, the banks are looking for the same thing; as little pain as possible.  Since the onset of the current mortgage meltdown, lenders have been inundated with defaults.  They aren’t in the property management business, and want to rid themselves of their properties as quickly as they can.  

Avoid contract contingencies.  Routinely, foreclosed properties are sold “As Is“, which means the buyer will take the property just as it is, at the time of the offer.  Should you include a Home Inspection contingency in your offer?   That is certainly an option, but not one I’d recommend.  Remember, your goal is to get to the next step and provide the bank with few, if any, reasons to say no.  However, asking for a home inspection for informational purposes can serve the same purpose, if, at some point, after ratification you decide to withdraw from the contract.  Additionally, often, in bank owned (REO) foreclosures, the necessary bank Addendums to the contract will often allow you to alter terms before the contract is “fully” ratified by both parties.  While the interaction with various banks are routine and standardized, there are some often differences from bank to bank, with specific procedures.  Many banks negotiate one contract at a time.  And, you want your contract to be the one they’re considering.  So, banks are keying in on the “net” cost to them, make sure your terms aren’t providing the bank a reason to say no to your offer.

4.  Go with Experience.

Real estate transactions can be easy, or they can be…not so easy.  Make sure you’ve enlisted the services of a professional real estate agent.  What does that mean? 

It begins with experience and competence.  While those traits don’t necessarily go hand in hand, they’re often found in pairs.  First, it helps to have someone on your side with foreclosure experience.  While the transaction process is fairly straight forward, having an agent that knows how the process works, and knows how best to “work the process” is invaluable.  They’re familiar with the necessary timing, procedures, and strategies to accomplish the objective.  Further, as the process unfolds, they’ve worked foreclosures with banks previously, and understand what it takes to get you to closing.  They have the experience and the competence to close the deal.

Good deals abound in today’s housing market for home buyers.  Many of those deals come in the form of foreclosed homes.  Capitalizing on the foreclosure opportunities involves a few simple steps.  By taking the time to become aware of what’s available, and acting decisively with the aid of an experienced professional, you can maximize your chances for success.  Of course, you first have to find something you want to buy.  So, how hard is that?

While Wegmans has some seventy stores, they’re exclusively in the Northeastern U.S.  Many shoppers outside of this area have never heard of Wegmans, much less stepped inside their doors.  From its birthplace of Rochester, N.Y., it’s stores have spread to neighboring states New Jersey, Pennsylvania, Virginia, and Maryland.   Store features include:

1.  Cheese Shop

2.  Bakery

3.  Coffee bar

4.  Patisserie

5.  Sushi Station

6.  Seafood Bar (with wine & beer by the glass)

7.  Burrito and Panini bar

8.  Crab Cake Counter

9.  Thai & Indian Buffet

10.  Kosher Deli

And much more, to include the two levels of seating for diners, who would rather sit down to enjoy their food.  This includes the upstairs balcony, where those who enjoy the touch of fresh air feel right at home.

For those of us who avoided the 20,000 or so shoppers who were brave enough to wade into Wegman’s on opening day, there’s plenty left to be had.  I happened to stop in earlier today, and the shelves have been fully re-stocked, while the aisles are still quite busy.  Its something new, and not your ordinary “shopping” experience.  As a matter of fact, the kids I witnessed in the store, seemed to be enjoying themselves as much as their parents.

Many have chosen to call Fredericksburg home because of its location, or history, or family in the area, or for its culture, or lifestyle reasons, among others.  And, availability of shopping is an important consideration for many.  With Wegmans moving into the neighborhood, we’re beginning to look a bit more like the “Big Time.”  Now, if we can just convince Trader Joe’s that Fredericksburg is big enough for them too, we might be on to something!

Most of us would probably agree with that characterization.  But, what does it take to get there, to achieve that end?

In the real estate business, many of us define personal success in terms of goal achievement, and numbers or monetary sales goals met.  For others, it may be as simple as satisfied clients.  But, whatever measure is used, what strategy do we use to acheive those goals?  What about clients, home buyers or sellers?  What methods do they use to maximize their chances of success?

For years, Fortune 500 companies have looked for certain qualities in their future employees.   For many, they are looking specifically for the ”braniacs”.   But at least one of those companies, has, for years, used a different approach.

Jack Welch, General Electric’s Chairman and CEO from 1981 – 2001, used another approach.  He looked, not necessarily for brains, but for what he called the Four E’s.

According to Jack Welch, it’s as easy as Four E’s.

This is the criteria he used to assess employees at GE.

1. Do they have the energy – positive energy?  Do they start the day with enthusiasm, and end it that way too?

2. Do they energize others?  According to Welch, “it doesn’t do you much good to be a whirling dervish if you don’t end up exciting other people.”

3. Do they have edge?  Do they have the ability to say ‘yes’ or ‘no,’ and not ‘maybe’? Do they make the tough calls?

4. The fourth E is execute. Do they get the job done?  In other words, do they deliver?

Said Welch, “Integrity is assumed. These four E’s—when you look at people and want to evaluate them, and when you look at yourself and evaluate yourself this way—give you a pretty good read on where you stand.”

According to Welch, this recipe for success will work in any environment.

If that’s the case, should we be looking for the Four E’s when we hire employees?  Are those considerations we’ve used in selecting peers for leadership positions?  If not, why not?

Are buyers and sellers looking for these qualites in the agents they hire to represent them?  It would certainly make perfect sense.  If they’re not, and, at the end of the day, leave the settlement table dissatisfied with their agent’s performance, they’ll have nobody to blame but themsleves.  It’s called, “Due Diligence.”

As an old friend used to remind us, “We all going to make a little bit money, but none of us is going to get any more time.”  Wasting time is something none of us can afford to do (well, at least I can’t).  But, it seems that no matter how hard we try, it’s “built into the system”.  In other words, it’s just part of life.  Many of the processes we’re involved in are controlled by others.  We don’t control all the moving parts, the timing, the content, or, the logistics of getting to the finished product.  But, what if we could find a way to make things “better, faster, cheaper”, would we?

Callaborative platforms or software allows us to do just that.  Collaborative management tools  like videoconferencing, online chats, instant messaging, application sharing, Wikis, and many others, allow us to leverage technology to, in essence, make it easier to accomplish a task.  Among other things, it provides users with access to the same material or event at the same time.  In other words, simultaneous task accomplishment.

In yesterday’s real estate Google Alerts I ran across the article, New Business Eliminates Real Estate Paperwork, highlighting an effort by a couple of agents in Cincinnati, Ohio, to develop software that provides those involved in reale estate transactions the capability to track negotiations and complete transactions online, and yes, that includes using electronic signatures.  The software is called MLS Contracts and is currently being Beta tested by their brokerage firm.

This looks like another tool to improve our business process. It’ll make the process more convenient and productive for agents and their clients.  Let’s hope the Beta test is without too many hiccups, and before we know it, we’ll all be using MLS Contracts, or something similar.