German Proverb

Creating change in our lives is hard to do. one reason is that there is a strong temptation for us to stand in place waiting until we can see all the parts of our pathway clearly. We want to know all the answers and solve all of the problems ahead of time. After all, why take chances? Once we know its safe we will start. Well, its a great idea, but life seldom works that way. Even when we think we know all the answers, fate has a way of changing the rules on us. When I first learned about and started teaching strategic planning for businesses and individuals we used a model called SMOST. The acronym stood for the five steps in the process which were Situational Analysis, Mission Statement, Objectives, Strategies and Tactics. I have learned from experience that this system does not work all that well. Actually the first two steps are still part of my planning process. Take a good realistic look at your current situation. Where are you now? What support systems do you have? What do you have that works in your favor? What seems to be against you? What needed assets are missing? The second part of planning is to develop mission and vision statements.  The mission statement says who I am or who we are in just a few words. The vision statement tells where we are going. Once we have done these three things it is time to begin the journey with the knowledge and tools we have now and trust that we will find what we need when we need it. Under the old SMOST model we would then develop the objectives, strategies and tactics to take us where we though we were going. This process created detailed plan and a preconception of how the journey had to be. Often we were unwilling to consider new and exciting options that would come up because we were to dedicated to the “plan”. I have found this over thinking a plan is counter productive. It is better to just take what seems to be the first, best logical step and then see what happens. Taking that first step, making a commitment to change and acting on it, is often the hardest part. As we begin to move forward with a positive expectant attitude unexpected doors begin to open for us and the way becomes clear. It is truly amazing that when we have the faith in God and ourselves to do this, it really works and often in ways we could never have foreseen. Have faith and begin! The world will support you!

• Any company receiving federal support should be required to pay back every penny of it at a solid rate of interest over a short period of time.
• Companies that are not able to pay back the federal support should be allowed to sink and their stock holders as well.
• No company executives should be allowed to profit from the crisis or use so-called “golden parachutes.”
• Those who knowingly engaged in fraud or misrepresentation should be prosecuted to the fullest extent of the law including mortgage originators and real estate agents.
• Every effort should be made to protect those who were victims of this crisis even though some of them acted out of personal greed.
• New meaningful laws should be passed that restrict the financial and banking industries so that this will not happen again.

I am a great believer that everything that happens to us, no matter how bad it is, is an opportunity to learn and grow and eventually prosper.  Having said that, I believe that if we don’t at least do the things I mentioned above, then we will be doomed to keep on repeating this cycle until we come to our senses.

The world is full of people who are quick to come up with reasons why it won’t work, can’t be done or is just plain impossible. They are more than happy to share their insights about why you don’t have what it takes. They can tell you 100 reasons that you are going to fail. These nay sayers are all around us. You may have some of these folks among your friends, or co-workers or family. The simple truth is this: When they are talking about themselves they may be right , but when they are talking about you, THEY ARE COMPLETELY WRONG!! That is they are wrong as long as you believe in yourself. Do not let their ignorance and small thinking effect you. Let their limited thinking effect their own lives, but not yours. Given the incredible power within you and the strong support from those who really know you and love you and believe in you it is inevitable that you will reach and exceeds your dreams. And I, for one, can’t wait to see their faces when you it happens.

• A Buyer’s Agent You want an agent who works for you and that isn’t always the case with every agent you will talk to. Up until quite recently all of the agents in a residential real estate transaction were agents of the seller and required by law to put the seller’s interests first.  They were not allowed to lie to and cheat the buyer, but other than that their job was always to get the best possible deal for their client, the seller.  That has changed and in pretty much every market today you can find agents who will work to represent the buyer. So the first question you will want to ask an agent is, “Will you work for me as a buyer’s agent?” Assuming they say yes, you should expect to be asked to sign an employment agreement with them stating how long they will work for you, what they will do for you and how they will get paid.
  • Percentage, hourly rate or flat fee Most buyer’s agents get paid a percentage of the sale price just like listing agents do and it is usually 2.5% to 3% of the price. Almost always this fee is collected from the sellers at the closing.  It is important for you to know that even though the seller is writing the check, you paid the commission because it was built into the price of the house. If you don’t like the idea that your agents fee goes up when you pay more for a property you may want to talk with an agent about a flat fee or an hourly rate instead of a percent of the sale price.
  • Guaranteed payment Another issue regarding commission is what would happen if you bought a property where the seller wasn’t offering a commission such as a for-sale-by-owner property or a foreclosure.  Would you be required to dip into your own wallet to pay your agent?  Would your agent be willing to work for you if there was no provision for them to be paid? If you want the highest level of service from an agent you should consider an agreement in which you guarantee that they will be paid in the event that there is no other agent involved.
  • Paying regardless of a sale In the great majority of real estate transactions you will only pay your agent if there is a sale. In reality this means that you are paying for all the services you received and you are also making a contribution towards the agents time and expenses for the transactions that did not result in a sale. After all they can’t really work for nothing.  If you are sure that you will be purchasing, you may find it to your advantage to negotiate a much lower fee that you guarantee to pay whether or not there is a sale. In some states you might even be able to get a rebate or credit out of the proceeds of the sale for the unused portion of the commission the other agent was offering to your agent.
• Market Analysis You will want to use an agent who agrees to give you a written price analysis for any property that you seriously contemplate buying.  The asking price is sometimes related to what the sellers need to get rather than actual worth.  You don’t want to reach an agreement to purchase and then have the bank’s appraiser tell you the property is worth what you agreed to pay.
• Property search How hard will the agent you hire work to find a property. Any agent will look on the Multiple Listing Service.  Will your agent also search the Internet in places like Craig’s List or the for-sale-by-owner sites? Will they look in the for-sale-by-owner magazines? Will they advertise on your behalf in print or on the Internet for property wanted? If you are interested in a particular area will they send out a mailing, or telephone or knock on doors in the area to see if anyone who’s home is not on the market would like to sell? By the way, they are only likely to be willing to perform these services if you have guaranteed to pay them a fee.
• Negotiation You will want an agent who is willing to negotiate on your behalf. Sadly in many real estate transactions the agents do little negotiating.  There are several components to a good negotiation and you will want to be sure your agent is willing to do them.
  • Develop a strategy When you find the right property you will want to work with your agent to develop a negotiating strategy. This should be based on the actual value of the property, your needs such as timing, finances etc, the perceived issues or needs of the seller, work that may need to be done on the property and anything else that figures into your decision.  You may not ask for everything you want in the opening offer however if you have to go up in price you add in the other things that are important to you or you may choose to make a full price offer and ask for everything including owner financing and all the furniture.  It is important to have an agent who understands all of the things that are important to you including price, and will help you to get everything with a good strategy.
  • Presenting the offer You will want an agent who is willing to try to present the offer in person to the sellers. I need to tell you this isn’t usually done. In most places your agent would simply call the other agent and tell them about your offer over the phone and then fax them a copy. The listing agent would then present the offer to the seller. This is not in your best interest. What if that other agent has an offer of his own working or someone in their firm has an offer. What if they just forget some of the stuff your agent told them?  By insisting on presenting your offer in person your agent assures that it will be properly presented and nothing left out. It also gives your agent a chance to observe the reactions of the sellers which can be very valuable when it coms to crafting a counter offer. I would go so far as to say that if an agent says they won’t present in person you haven’t found the right agent yet.  By the way, when I say it isn’t done this way in most places, the rules of most MLS’s and the Code of Ethics of the National Association of Realtors® give the buyer’s agent the right to be there when the offer is presented to the sellers.

  Choosing the right agent to represent you when purchasing a home is an important decision. Don’t just pick the first agent you talk to or your friend from the bowling league. Be sure to spen some time interviewing the person you are hiring. Remeber you are the one who is paying them and choosing the wrong agent could cost you thousands of dollars.

• A market analysis It is a standard practice for most agents to assist a client by helping them determine what a property is worth and this is certainly a service that you will want as a seller.  This is more than the agent simply saying, “Well, let’s see now. I guess it’s worth about $200,000.”  You want an agent who will put their analysis in writing with a detailed examination of properties similar to yours that have sold recently and others that are currently for sale. When you find an agent who will do this (and not all agents will) you should pay attention to what they say because one of the worst mistakes you can make, especially in a market like today’s, is to over price your property.
• Marketing You will want to ask your agent for a detailed marketing plan for your property. It should be very specific detailing what will happen in week one and week two and week three and so on.  Certainly the marketing will include putting the property on the Multiple Listing Service but it should also include much more, especially Internet marketing.  Today the Internet is more important than print marketing. It is typical for sellers to want to see a picture of their home in the local papers, but in most markets this is not a good use of marketing resources.  Today’s buyer typically goes on line to start their home search and you want your property to be there. Your agent may want to do an open house for the public and this is OK but in most markets it is not likely to find a buyer for your home. Be sure that your agent does use one of the most effective sales tools which is the yard sign.  Well placed attractive yard signs are a very productive way to attract buyers.
• Communication When people are unhappy with a real estate agent 99% of the time the major complaint is lack of communication.  You will want to be sure that your agent will contact you on a regular basis, even when there is nothing new to report. Ask them what sort of contact system they have in place. When will they contact you? How will they contact you? Phone? Email? How do you get in touch with them? How quickly do they get back when you leave a message?
• Referances “Please give me the names of five of your previous employers (clients) so that I can contact them.  Do you have any written letters of reccomendation from previous clients.”  You want to know that the people who used this agent in the past would use them again.  If an agent can’t give you any reccomendations be suspicious. In return you should also be prepared to write a reccomendation when the transaction is over to describe the good service you got.
• Negotiation According the the National Association of REALTORS® 2007 Profile of Home Buyers and Sellers one of the major concerns of buyers and sellers in hiring an agent is that they know how to negotiate. Sadly many real estate agents don’t negotiate very well. Let me explain why I say that. The typical practice in a real estate transactions is that the buyer makes an offer to purchase a property. The agent of the buyer then contacts the agent of the seller and tells them what the offer says and faxes them a copy. The agent for the seller then presents the offer to the sellers and this is usually done over the phone. The sellers make a counter offer to the buyers through their agent and the buyer’s agent. Most of the time these offers and counter offers are about price. It is not a negotiation, it is an auction. “We offer $250,000.” We want $290,000″ “We will come up to $260,000.” “OK, we will come down to $285,000.”  And so on.  This is not really negotiating. In a real negotion there is give and take. “We are willing to come down $10,000 in return for moving the closing date up two weeks and we will keep the riding lawn mower.” You want an agent who will do several things for you with regard to negotiating.
  • Your agent shoud be willing to ask the agent of the buyer to come over and present the offer in person. Why? So that you can ask questions and learn as much as possible about the buyers position. Price is always a major consideration, but there can be other factors that can be important such as time frames, owner financing or personal property to be included. Information is the key to a strong negotiation and talking over the phomne and faxing just don’t deliver enough information.
  • Your agent should work with you to develop a negotiating plan to help you get the things that are important to you. This would include more than just price. Planning a negotiation takes skill and time and you will want to discuss this in detail with prospective agents. How do they plan a negotiation? Do they have any worksheets or planning tools they can tell you about?
• Commission In a previous post I mentioned a recent survey of buyers and sellers of real estate done by Consumer Reports which showed that 46% of buyers and sellers asked their agent to cut the commission and when they asked, 71% of them got a reduction. What’s more this did not seem to effect the service they got in any way.  Based on this you should always ask for a cut in the fee knowing that there is a 70% chance that you will get it. In fact if you find more than one agent that seems to fit your needs do not be afraid to have them bid against each other. A reduction of 1% in a $200,000 transaction is $2,000 more in your pocket.

The bottom line in all of this is that when you are hiring someone to help you with a big financial enterprise like selling real estate you want to hire the best person you can and if you pay attention to issues I have mentioned above you should do well.

• Alphabet Soup. Some agents are designation collectors.  They have all kinds of initials after their names. Now I have to say that I teach many of these designation courses and the information that a student gets from them can make them a lot more professional and effective. I think these designation courses are a good thing, but don’t be fooled into thinking that just because a person has and ABR, SRES, GRI, CIPS, CRS, CRB, etc after their name they are super agents.  There are many people who collect designations but aren’t very good at real estate. By all means consider the designations but do not decide on someone only because of their “alphabet soup”.
• Company Name When you are new to an area it is only natural that you will be attracted to the nationally known brand name firms because you have heard of them before. In fact one of the main reasons that the owner of that franchise decided to pay the money to affiliate with a brand name was because they hoped people would choose them just for the name.  I am not saying that these firms are not good.  In fact on the whole they usually are good and they may have some support and referral systems that a smaller local agency might not have. Having said that, you need to understand that while you are usually signing a contract with the firm, the important consideration is the agent themselves.  Big brand name companies can have lousy agents and good agents. Obviously you want a good one. In fact you want the best one in the market and they may very well not be working for the big brand name firm.
• Top Producers When I first got into real estate over 30 years ago a top producer was someone who did more than one million dollars in sales. Today one million is just barely making a living. In choosing an agent to work for you you do want someone who is successful and experienced, but you may want to be cautious about hiring the top salesperson in the company. Why? Because they may be too busy to give you the attention you want. If you are considering a top producer you will want to ask lots of questions about who will be working with you; will it be them personally or one of their assistants.
• The Listing Agent  Often the first thing we do when we decide to buy is call real estate offices and arrange to see houses.  The firm that is showing the houses to you was hired by the sellers to help them market the property and they are pledged to help the sellers get the best possible deal. If you decide to buy one of the properties listed by their company they may not be able to legally give you the level of service that you will want.

So by now you may be asking yourself, “If I can’t rely on these things, then how do I find the right agent.” The answer is that you take the time to conduct job interviews. You are hiring this person to assist you with the biggest financial decision of your life so far and one that will have a large effect on your future. What’s more you will be paying this person thousands of dollars for their services. Doesn’t it make sense that before you put them on your payroll that you give them a thorough job interview?  Your decision to hire them should be based on more than their good looks and the fact that they “seem nice enough”.  So what sort of questions do you wnat to ask in interviewing agents for the job? That is somthing we will get into in my next post.

• The public thinks the fees being asked are too much to pay for the service they are getting and they show that by asking for a discount. If they don’t get it they will most likely take their business elsewhere knowing the service will be just as good at the shop down the street that charges a lot less.
• Agents know that the services are overpriced or they wouldn’t be so willing to cut their fees.  After all, if a firm is losing money they can’t stay in business so you can only cut your fees within the range where it is still profitable for you to do so.  I am willing to take less profit to get the business but I won’t work for no profit.

It is my experience that most agents (other than the fee-for-service companies) have a set marketing plan that they plug every client into regardless of what they pay. The agent doesn’t say, “You are paying a lower fee so I will cut back on the marketing and I won’t hold an open house.” Instead you get whatever marketing they always deliver. After all, they don’t get paid until the house sells so they won’t do anything that might reduce the probability of that happening.

My advice to the public (buyers and sellers alike) is always ask for a discount and if you can’t get one look for another firm. My advice to real estate agents is take a realistic look at the way you are charging for the excellent service you are providing and see if it really makes sense. Is it fair to the clients? Is it fair to you.

• Real estate agents spend lots of time working with clients in transactions that don’t close (often because of the choices made by the client) and the agent doesn’t get a penny for their work.  In fact usually agents work harder and put in more time for these clients than on those that do close. Is this fair to the agent? It is only fair if we agree that the agent’s job is to make a sale.  Most of the agents I know see themselves as consultants and not as “salespeople”. If you are a consultant then tying your compensation to a successful transaction is clearly unfair. You can do an excellent job and the client’s actions make a sale impossible so you gave away your services.
• Because real estate companies only get paid when there is a sale and they work in many situations where a sale doesn’t take place, the cost of those unsuccessful transactions must be built into the fee. If I am going to work without compensation in one transaction, I have to make up the costs somewhere else and in real estate that means my commission must reflect the losses I suffered in transactions that didn’t complete. In other words the seller, who commonly writes the compensation check, is paying for their own transaction plus several others. Is that fair to the seller? If everyone, buyers and sellers, paid for their own services no one would ever pay more than 1% or 2% of the sale price as a fee and the real estate companies would still be properly compensated for their services.
• Because the commission is based on the sale price, the more a buyer pays for a property, the higher the commission. Is that fair to the buyer? You might say, “But the seller pays the commission so it doesn’t matter”, but that is not really true. Technically speaking the seller usually writes the check, but because the commissions are built into the sale price, both the buyer and seller contribute.  The higher the cost of the house is the more dollars the buyer and seller have to contribute to the transaction to compensate the agents. So, I ask again, is this fair to the buyer?
• The higher the sale price, the more money paid out in commissions. Does this mean that agents work harder selling higher priced homes so they deserve more money? Does it mean that as sale price goes up the cost of marketing increases proportionally?  I don’t think so. I would buy the argument that it costs a bit more in time and marketing to sell a $2,000,000 property than it does to sell a $500,00 property, but it certainly does not increase the cost by a factor of 4. So is it fair to clients that they have to pay significantly more money in commissions just because their property is valuable?

So if the system is so unfair why hasn’t it changed?  In fact it is changing, but change is hard and usually comes slowly. Agents don’t want to upset the apple cart. They say, “If it ain’t broke, don’t try and fix it.”  Change is a little bit threatening so we avoid it unless we can see a clear benefit to changing. The change in compensation is coming slowly, but it is happening. We are seeing more and more companies trying different compensation systems. I should mention that this is where I usually hear someone scream, “People want full service brokers.” I agree that this is true for most clients and I am not talking about reducing service at all; I am talking about giving the full range of real estate services and pricing it in a way that is fairer to all parties.  The new systems are slowly evolving. Some brave companies have taken the leap and are using pricing other than a percentage success fee. They charge retainer fees, and/or hourly rates or flat fees or some combination. Some companies are offering a percentage fee and another type of compensation to clients as a way of easing into a newer system. The bottom line is that they change is not only coming, it is happening now.

“Reflect upon your present blessings, of which every man has plenty; not on your past misfortunes, of which all men have some.”

Charles Dickens

Of the three time periods (past, present & future) the present is the only one we can be sure of. The past is fact. It was here and now it is gone and we can’t change it. Having said that,we can change how we perceive it so that it is a source of knowledge and, hopefully, strength. The future is our dreams. We may get there; we may not get there. It too can be a source of strength and courage. Today is here and now and while we can’t control everything about it, we can control a lot of it. The to take charge of the present is to maintain a positive attitude and keep taking little steps (or big ones where possible) in the general direction of the future we want. It doesn’t matter so much whether you have a full clear picture of that future or just a feeling about what you want; keep moving in that direction and the picture will get clearer. We take the valuable lessons from the past knowing that what has happend to us did so for a reason. Our past was put there to help us get where we want to go if only we have the enlightenment to take the good from our lessons and leave the pain and blame behind. Living in the present, in the now is a challange, but one that is possible for all of us.  Eckhart Tolle in his book “The Power of Now A Guide to Spiritual Enlightenment” provides a lot of guidance on this path. Living in the now of our lives means living our lives to the fullest. So take from the past only the beautiful memories and the lessons and use the future as a beacon or goal, but live life fully and richly in the present moment.