8
2012 January - February
Serving the Business Needs of OUR Professionals
Lessons from 2011 By Michele Lerner After experiencing the roller coaster ride of real estate for the past decade, local REALTORS® and brokers are ready to take stock of their transactions and move forward into 2012 armed with new knowledge. REALTORS® and brokers are aware of trends that could impact the local market in the coming year, such as problems with financing, appraisals and frustrated buyers. “One of the downsides to the market this past year has been the inability of big banks to dependably steward loans from application to closing,” says Paul Sliwka, president and principal broker of Central Properties in D.C. “We have started redoubling our efforts to make sure buyers have options. We recommend three or four regional and local competitors to the big banks so that our buyers have the ability to react and to change lenders quickly if necessary.” Steve Dean, a REALTOR® with Re/Max Allegiance in D.C., says he and his partner Eddie Rangel saw lenders sometimes pulling their commitment letters at the last moment. “Even when representing a seller, it remains important to know which lenders can perform when others cannot,” says Dean. “When the financing was falling apart on our listings, we were able to provide the buyer’s agents with loan officers who were able to perform miracles.” In one extreme case of a financing problem, Elizabeth Blakeslee, an associate broker with Coldwell Banker Residential Brokerage in Washington, D.C., says that an appraisal issue almost caused the buyer’s financing to fall apart, even though the borrower was only financing $150,000 of a $475,000 purchase. “The appraiser requested building permits for a decade-old basement kitchen,” says Blakeslee. “The permits couldn’t be found so the appraiser wouldn’t complete his report. Once the listing agent said she would provide the financing, the lender pushed the appraiser to provide the information needed for the loan. The lesson here is to always have a ‘plan B’ and to allow enough time to work with another lender if necessary.” Buying a foreclosure from a bank can be just as frustrating as arranging financing. “A client of mine won in a competitive multiple offer situation for a foreclosure, but then he tried to negotiate with the bank over the addendum to the contract,” says Morgan Knull, an associate broker with Re/Max Gateway in D.C. “The buyer had used an escalation clause and the bank had made a counteroffer within the range of that clause. After some back-and-forth, the bank simply revoked the contract and went on to another buyer.”
Capital Area REALTOR®
lasting impression.” While open houses can be valuable, Dean says some out-of-town buyers are buying with “virtual eyes”, not seeing the property until the settlement date. “In one case, the buyers relied on virtual tours of homes and sent friends to preview homes with us,” says Dean. “They used Google Maps to see streets, Skype to communicate with us, and DocuSign to sign all the needed paperwork. As our clients move into new communication methods, we have to be sure we’re moving with them or we’ll be left behind. We don’t remember when we last sent a fax.” Other issues in 2011 concerned appraisers and home inspectors. Blakeslee says she was listing a carriage house that still had rings on the walls for horses. An architect wanted to buy it and renovate it into a home, but it was difficult to find an appraiser who would value the place because there were no comparable properties. “Eventually, the buyer got a renovation loan and the loan amount was based on the finished value of the property,” says Blakeslee, “but for an unusual property it could be a good idea to talk to an appraiser before putting the house on the market. That would have eliminated some of the delay with this one.” Sliwka says that he has recently seen home inspectors scaring some buyers away from homes by presenting a darker-than-necessary portrait of the property’s condition. “Home inspectors are concerned about their liability so they tend to present the worst case scenario, which sometimes results in the buyers walking away from a perfectly reasonable property,” says Sliwka. “I recommend that agents explain to clients that the inspector is hired to give the worst case scenario. The buyers should ask about the actual likelihood of specific problems to occur.” On the seller’s side, Knull says he was shocked last year at a settlement where he was representing the buyer. “The sellers had clearly not seen the HUD-1 until the closing and were extremely upset because they had thought their profit from the home sale was simply the sales price minus their mortgage pay-off,” says Knull. “Although this seems crazy and the agent said he had gone over the listing agreement with the clients, they somehow didn’t realize they had to pay the Realtor® commission. In the end, the listing agent credited back his entire portion of the commission.” Knull says he makes a practice of creating a net sheet whenever an offer comes in on his listings so that the sellers clearly understand the commission structure and their other costs. “A net sheet is more tangible than a listing agreement,” says Knull. “I keep a copy for myself, too, so no one can ever say they didn’t understand.” A trend that Craig Kay, a REALTOR® with Re/Max All Pro in Rockville, says is likely to continue for several years is the short sale market.
Knull says the takeaway from this experience is that buyers rarely win arguments with a bank, so they should just accept an offer or decline it rather than try to negotiate. “Last year I ran into a lot of hard line buyers who expected rock bottom prices, but in most areas prices bottomed out a year or so ago,” says Tom Kennedy, president and CEO of Oz Realtors® in Laurel. “In 2012 we’ll see a lot more frustrated buyers because of the lack of homes at prices they can afford.” Kennedy says the best way to handle this is to make sure buyers are truly qualified and know their price range.
“There is so much inventory that has the potential for a foreclosure that Realtors® should be prepared to work out short sale transactions,” says Kay. “The banks are more willing to listen and REALTORS® need to put a plan in place to take sellers through the short sale process. Realtors® should be extremely clear and develop the trust of short sale sellers.”
Kimberly Casey, an associate broker with Washington Fine Properties in D.C., says that while her business grew in 2011, she believes everyone has to work harder to make the same amount of money. “Open Houses are very important,” says Casey. “You never know where your clients are going to come from and open houses are a great way to meet the neighbors and potential buyers. Engage with everyone who walks in the door and make a positive and
One of the best lessons for any year comes from Casey. “Treat other agents with respect, integrity and honesty,” says Casey. “This business is hard and clients are stressed out by home inspections, lenders, appraisals and more, but it is our job to manage the process and get the deal to close. It is vital that we treat each other well as hopefully we will be doing many, many deals with each other. Once you lose a person’s trust, you can never get it back.”