Hampton Roads Virginia Real Estate

About a year ago, I wrote a post for the Virginia Association of Realtor's blog, VAR Buzz, about these real estate "fees".  I got in a lot of hot water over my "opinion" and toned it down a bit.  But, today, I heard something that made my blood boil.

One of the largest real estate companies in the United States recently hired an outside consulting firm to conduct a compensation study with their agents.  Know what the #1 complaint among the agents was?  It wasn't the agent split nor the outdated office equipment; it was the company forcing the agents to charge the clients and customers a "transaction fee".  Know what the CEO said?  "Tough.  It's not going away".

It's been about 10 years since as an agent, I was instructed by upper management to charge this "fee".  Over the years, the name of the fee has changed, the amount of the fee has increased, new policies have come out about how to "address" the fee with the consumer and the penalty the agent faces for not collecting the fee.  And after 10 years, I still feel like a heel when I charge my clients the fee.

At this point, most all of us know about Busby v. JRHBW Realty, Inc. d/b/a Realty South, Case No. 06-15308, 11th Cir. January 17, 2008.  In basic terms, this case was about Busby seeking class action status for a claim that the Brokerage fee charged was unearned and in violation of RESPA Section 8(b).  After this case, many brokerages began calling the "fee" a "flat fee commission".

Well, I'm not the CEO of a brokerage nor am I an attorney.  I understand that these "fees", by whatever they are called, generate quite a bit of revenue for the real estate companies.  I also understand that in 10 years, I have never once witnessed consumer A, who pays the fee, getting more real estate services than consumer B, who doesn't pay the fee.

But, all that being off my chest now, here's where my thoughts have brought me today:

Annie Agent represents Buyer Bonnie in the purchase of a home.  Annie looks at the MLS and finds a home she would like to show Bonnie that is listed by Listing Agent Leroy.  Listing Agent Leroy has negotiated a commission with Seller Susie and made an offer of compensation to cooperating brokers of 10 apples.  Annie Agent is a good, responsible agent and has disclosed to Buyer Bonnie in a buyer brokerage agreement that she will be paid 10 apples plus an orange (i.e. commission + flat fee/transaction fee or whatever you call it) for her real estate services.

Annie Agent, in writing the purchase agreement for the home Buyer Bonnie wishes to purchase, requests Seller Susie to pay all of Buyer Bonnie's settlement expenses.  Seller Susie agrees and the transaction proceeds to closing.

At closing, Seller Susie is surprised to see that along with Buyer Bonnie's lender and title charges, she is also being asked to pay for an orange for Annie Agent on behalf of Buyer Bonnie.  Seller Susie and Listing Agent Leroy are upset because when Annie Agent showed the listing, that is an agreement to accept the co-brokerage commission offered of 10 apples.  The brokerage fee agreement signed between Listing Agent Leroy and Annie Agent also states that Annie Agent is to receive 10 apples (not 10 apples plus an orange) from the negotiated commission between Listing Agent Leroy and Seller Susie.

Is Annie Agent's additional charge of an orange, which Seller Susie is being asked to pay, an interference in the commission agreement between Seller Susie and Listing Agent Leroy?  If so, is that not in violation of the Realtor Code of Ethics:  

"Standard of Practice 16-16:  REALTORS®, acting as subagents or buyer/tenant representatives or brokers, shall not use the terms of an offer to purchase/lease to attempt to modify the listing broker's offer of compensation to subagents or buyer/tenant representatives or brokers nor make the submission of an executed offer to purchase/lease contingent on the listing broker's agreement to modify the offer of compensation. (Amended 1/04)"

What are your thoughts on this?

Footnotes:

A few interesting points that have now come up....

1.  If the Brokerage is now required to call the "admin fee" a "flat fee commission", does it now fall under "commissions earned" by the agent?  Has the Brokerage amended their agreement with their agents to address this additional commission as earned revenue which should be based off the agent's split?

2.  Again, since the "admin fee" is now a "flat fee commission", then the ONLY place it should be permitted on the HUD-1 would be line 701 or 702 (Total Real Estate Broker Fees).  Many agents have said they are still seeing the fee on lines 1301-1305 (Additional settlement charges).  

If you haven't read Part 1, you can do so by clicking here.

Making the decision to put our house on the market really hit home with the reality of our situation.  We were fortunate to not be in financial trouble; we could handle the mortgage if Frank was out of work for a while...but for how long?  Was the stress this would put on us really necessary?

So, in May, we started packing things up, cleaned, painted, pressure washed, landscaped and stuck a "For Sale" sign in the yard in June.  Being that I wanted to keep my emotions in check, I hired a Realtor (not myself) to list my home (one of the best decisions I have ever made).  In spite of the flat market, it sold quickly.

My husband became an interviewing machine...online interviews, phone interviews, in person, group...you name it, he tackled it.  A few offers came in, but he wanted a company that was local, had a strong balance sheet and was imbedded in the community.

He called me after "THE" interview.  The position was exactly what he wanted.  The company had all the qualities he was looking for.  He prayed like I have never seen him pray before.  He wanted that job so much....and it was located 330 miles across the state.

The call came while we were at REBC San Francisco.  I'll never forget it...I was talking with Brad Andersohn at Trulia HQ and I got a text message from Frank, "I need you ASAP".  It was real.  A real job.  A great job.  We were moving...in a week...across the state to Blacksburg, Virginia.

"What am I going to do about my real estate business?"  I suppose I had been in denial that this was actually happening.  All I had worked for...all I had built up since 1998...what the hell was I thinking?!?!?!  I had no desire to start a real estate business all over again in a new place.  Could I commute?  Should I live in Virginia Beach 4 days a week and Blacksburg the other 3?  I had grown up in Virginia Beach and while the rest of my family no longer lived there, it was still my hometown.  My friends were there, my business was ingrained there..my life was there.

To be continued....

When I woke up this morning (not too early mind you), I realized that a year ago today, my comfy little life as I knew it had changed forever.

March 15, 2009....as my husband and I were heading to bed for the night, he got an email alert about his company, a large, international bank based overseas.  The London papers were announcing a downsizing of the company in the USA and plans to significantly reduce the amount of business done in America.

Needless to say, we didn't sleep much that night.  Visions of pink slips and resumes and trying to find a job in a difficult economy took over any chance of counting sheep.

The next morning, my husband was one of the few people who knew anything about what had been reported just hours before in London.  When word did come from the home office in Chicago, it was vague and noncommittal.

Then, Thursdays started happening.  The dreaded Thursdays where the pink slips were handed out.  Each Thursday morning, my husband and I would wonder, "will it be today?".  To avoid the embarrassment of packing up his desk while security oversaw his departure, my husband started boxing up things and bringing them home, "just in case"...

In the meantime, my real estate business was doing well.  After 10 years in the business, I was used to the jump in business that spring brought and I focused more and more on my work, rather than the depressing state of my husband's.

But, I could see the sadness...the worry.  A man who prided himself on supporting his family was suddenly thrown into an unknown world of seeing his coworkers lose their jobs and wondering if and when his time would come.

That night, we made a decision.  We were not going to sit back and wait for the inevitable.  We would look at this as an opportunity.  To be grateful that we had been given notice of what was about to happen and use the time left to find another job...a better job...perhaps in another place.

Using the skills I had learned through blogging and online networking, we worked on his LinkedIn profile, built a website for him, joined multiple online job search sites, contacted former coworkers and everything else we could think of to market Frank Merritt.  He listened to interviewing books on his commute to and from work and searching for a new career became a full time job in itself. 

To be continued.....

Buyer-agents sell 100% of our listings.  Yes, the buyers may find our properties online; perhaps even through our marketing efforts...but buyers don't bring us contracts; their agents do.

When we decided to treat co-brokes as customers ("guests" in our "homes"), our business model changed dramatically.  Buyer-agents now call us WANTING to sell our properties - they tell their fellow agents and we've built a "following", if you will, of repeat "customer-agents".

Yes, transactions can get sticky; even downright ugly.  Our tongues can bleed from biting them so hard.  But, we each represent our clients and our goal is to look out for their best interests...ahead of our own.

A few months ago, we came up with a list to help us offer a better customer experience for our fellow agents.  By no means do we feel we have reinvented the wheel; however, it has definitely helped our business.  Also, we review each of these items with our sellers; since they are our clients and we work for them.

1.  WE WILL make sure our listings are easy to access and show.  We keep a "hidden" lock box nearby just in case an agent leaves a key inside or a termite inspector needs to run by the house to do a reinspect in order to close on time.  We ensure all properties have utilities on and have lights for night showings.

2.  WE WILL ensure that making appointments to show our listings is easy.  Phone, text or email - whichever works best for the buyer's agent.

3.  WE WON'T participate in dual agency.  Our sellers deserve our "undivided representation".  Buyer agents will know that a special commission arrangement will not be noted on our listings.

4.  WE WON'T bug buyer-agents with phone calls requesting feedback.  Like Seth Godin says, "A phone call is an interruption".  We send a short, 4 question email asking for feedback at their convenience.  When the survey is filled out, we send a thank you, whether the feedback is positive or negative.

5.  WE WILL do our best to overcome buyer objections and be creative.  Adding a wall, installing another closet or changing a paint color can be a lot less expensive for a seller than 90 more days on the market.

6.  WE WILL present any and all offers in a timely fashion and get responses quickly.  Showing a property and writing an offer takes a lot of time and effort.  We respect that. 

7.  WE WON'T say, "That's not our job".  Our closing coordinator helps the co-broke agents.  Yes, we will send the contract to the buyer's attorney.  Yes, we make sure all parties who are supposed to have the new addendum, receive it.  We realize that buyer-agents are out showing property and aren't always able to stop and re-send a fax or pull up a phone number.

8.  WHEN WE screw up, we will admit it and try our best to fix it.  If that means we have to pay for a re-inspect, a home warranty or a new refrigerator, so be it.  Our goal is the closing table, not a big ego.

9.  WE WILL have a title search done prior to listing to avoid title issues delaying closing.

10.  WE WILL make their day.  At then end of it all, whether it's flowers, a gift card or a handwritten note, the buyer's agent will know that no matter how difficult the transaction, we appreciate their business and selling our listing.

If you think the $8000 first time homebuyer tax credit should be extended, please vote today!

I know I am in the minority here when I say agents should not be negotiating short sales.  (which I have written about ad nauseam) I am fully aware that in some markets, 90% of the housing inventory is a short sale or REO.  Every time I turn around, I see some other "agent expert" hawking their short sale how-to book or "qualifying" designation.  Unfortunately, short sales are part of the real estate business in 2009; however, we are in unchartered waters as agents and I hope that in 10 years, the real estate industry doesn't look back on this and say, "what were we thinking?".

1.  Does your E&O insurance specifically state that you are covered to engage in a short sale?  I asked my insurance company this and the answer was, "yes"; however, the policy doesn't specifically state "short sale" nor any of the acts normally associated with handling a short sale.  The policy does state that I will not be covered for acts as an agent, "not expressly described herein".

2.  If the sellers currently have a government mortgage and they sell it short, will they be able to get another government loan (including a government backed student loan) unless they pay the difference?  From what I have read with regards to VA loans, the answer is "no".

3.  With some banks, if the property has fallen in value to a point where it is not worth more than a certain amount (say $25,000), they will not foreclose.  Of course, they do not advertise this; however, they will just release the lien on the property.  

4.  We are not just dealing with sales prices here.  We are dealing with the futures of these sellers.  Let's say seller A sells short, is required to liquidate his savings and starts having his wages garnished for the difference 2 months later.  Seller B, same mortgage company, same shortage, doesn't have to liquidate anything and the bank agrees to no deficiency judgment.  Is seller A's agent at fault for not negotiating better with the bank?

5.  How does your licensing board address agents handling short sales?  The licensing board in Virginia doesn't specifically address short sales; however, it is VERY specific about agents performing duties that should only be handled by an attorney.  Is negotiating a short sale with a bank (who is not a party to a standard sales contract), a "ministerial" act for an agent, or something with legal ramifications that should be handled by an attorney?

My husband works for a large bank.  Everyday, they get calls from former sellers complaining that their wages are being garnished, the bank placed a lien on their other property, they lost their job because of their credit (yes that really happened) etc., and that "my agent never told me this would happen", or, "my agent told me the bank could do this, but the bank's so swamped, probably won't".

Sorry, unless a real estate agent has a crystal ball and knows the long term ramifications of a seller doing a short sale, I don't think they should be calling themselves a "short sale expert".  Even the most "experienced" agents working short sales have only been dealing with them for what, 3-4 years tops?  That's not the making of an "expert" in my opinion.

Tina in Virginia

Earlier this week, I had an IRL conversation with the lovely Lisa Sanderson (IRL = "In Real Life" for those of you not using Twitter).  While the purpose of the call was a referral I had for the Poconos area, as typical females, we ended up going way outside the subject at hand and on to other things.....

"So, Lisa, how do you like Better Homes and Gardens Real Estate?" I asked.  (As you may or may not know, the Better Homes and Gardens real estate franchise is coming up on it's 1st birthday this August.)  Lisa's response, "I love it and here's why........"

After telling me about the great technology and gushing about the company philosophy, Lisa mention Sherry.  Sherry - as in Sherry Chris, the CEO of BHGRE.  Sherry - as in @BHGRE_Sherry on Twitter.  Sherry - as in a presence at virtually every RE Bar Camp and Real Estate Conference this year. 

If you are active in social networking in real estate, you probably know Sherry.  She probably follows you on Twitter, Facebook, LinkedIn, ActiveRain, etc.  If you have attended real estate conferences, you have probably seen her mingling at the after-party.  She isn't loud, she isn't boisterous.....she's just....a presence.  She is also the only large-brokerage CEO I can name (besides the one at the company where I work).

In just one year, Sherry has been able to put BHGRE on the map in part through networking and engaging with agents throughout the country.  Rather than sit back in a plump leather chair in a big corporate office, she is out networking, mingling and getting to know the agents, the "worker bees".

So, while the other large-brokerage CEO's are sitting at their desks trying to figure out how to make the indians work harder for less of a split so the chiefs can keep their jobs, Sherry Chris is out meeting their agents and engaging with them.  Who do you think is doing a better job of connecting with the agents?

Here's a little quiz, besides your own company, how many brokerage CEO's can you name?

Tina in Virginia

So, what is the one gift I would like to have for Christmas?  This is a tough one, my husband and I have made a pact to not purchase gifts for each other this year.  We want this Christmas to be about family, not "stuff".  Because of this, I really haven't thought much about what I would like to have.  I wrote a post yesterday about my Technology wishlist for 2009 - but not sure if one of those would take the cake for this purpose.

Something I can touch and hold?  It has to be an object and it has to be for me?  Hmmmmmmmmmm.......

I'd love to give my father his 1968 Malibu Convertible back.  He LOVED that car and after he sold it in 1975, used to take my brother and I by to visit it.  The man he sold it to still owns it (this is a picture I snapped back in October of the car) but doesn't want to sell it.

I'd love to give my son a visit to the White House.  He is 5 and talks about it all the time.  I sent in a request through my Congresswoman, Thelma Drake, back in July to get a tour (for this December).  Unfortunately, Congresswoman Drake's office never confirmed our tour and then shut their offices down last week (she was not re-elected).  So even though she is still my Congresswoman until January 20th, she refuses to help.

I'd love to give my husband job security.  He works for a large bank that has had quite a few cutbacks and closed offices.  Seems the employees are always on edge about their jobs being eliminated.  The uncertainty can be very stressful - especially for someone who just quit smoking (I am so proud of him for that).

But this needs to be for me; not for someone else.  Hmmmmmmmmmmm........

I would like a mac-daddy home office.  The one I have now is pretty pathetic.  Nothing matches.  It's not very organized.  It's uncomfortable.  It's also shared with my son's toys.  That's what I want.  To wake up Christmas morning to an organized, beautifully decorated home office with a cherry desk and bookshelves, equipment that always works in synch, a big comfy leather chair, a filing cabinet that is already filed............that would be perfect!

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So, whom shalll I "bless" with the task of sharing their Christmas/Holiday Wish?

1.  Heather Elias

Heather and I were finally able to meet in person at the VAR Convention in October.  She is a down-to-earth, fun person and a fantastic blogger!  Take a look at her blog:  LoCoMusings.

2.  Jeremy Hart

Jeremy is a very technologically savvy agent in Blacksburg, VA.  Jeremy and I share a passion for all things Virginia Tech and orange and maroon.  Jeremy has recently started a recycling effort in Christiansburg, VA and writes a great blog:  NRVLiving.

3. Jennifer Keltner

Jennifer and I have been working together for about a year now and just recently formed a partnership.  Her hard work and enthusiasm have given me a much needed jump-start and I love working with her!  Jennifer authors the blog for our Military Relocation Team.

4.  Sarah Cox

What can I say?  Sarah can do anything and will help with anything even without being asked!  I adore her like a sister and she even babysits my son!  Sarah also sells Avon and has great taste.  Read her blog here.  She has some great deals and free shipping on Avon products!

5.  Justin Williams

Justin is a wealth of technology knowledge. and is always willing to share and brainstorm.  I am so glad he has become a part of our office!  Justin is also now authoring a blog everyone seems to be talking about:  Social Media Vision - be sure to check it out and subscribe!

Tina in Virginia