A new statewide real estate law went into effect in Washington on June 12, 2008 which does the public more harm than good.

Washington State's new distressed home law, designed to eliminate equity skimming schemes, puts undue risk and liability on real estate brokers, agents and even buyers by creating a new form of agency by statute. This new form of agency mandates a fiduciary responsibility between real estate broker, agent and even a buyer who strikes a deal with a distressed home seller.

For example: A buyer's agent sells a property to their client, and the listing is defined as distressed under the guise of the new law. In this market it is very common for a buyer to make a lower offer. If the offer is tendered, even a few thousand dollars below the asking price, under the new law the buyer could be viewed as taking advantage of the seller in this situation. The seller would have legal recourse to sue the real estate brokerage, the agent and the buyer under the new law for up to three times actual damages up to $100,000 plus attorney's fees!

My brokerage along with many others has taken a solid stance to not take any distressed home listings. In addition, agents statewide need to tread cautiously when showing homes that may carry a distressed status. This new status will be noted in the agent remarks as "NO 2008 LISTING."

Distressed homeowners are going to have a very difficult time finding good representation under these new laws, which are absurd to say the least. Any brokerage who takes such a listing is also taking on a gratuitous amount of risk and liability.

Further, a distressed home is only defined as an owner-occupied residential property up to four units. This would include the owner occupying a unit in a duplex, triplex or fourplex. However, this would exclude condos in buildings that have five or more units. So homeowners of condos apparently do not apply to the new law.

Please urge your state representatives, senators and the governor to repeal this law immediately as it will invariably do more harm than good by robbing desperate sellers of valuable agency representation and the expert marketing of property that really needs to be sold to avoid foreclosure. http://www.leg.wa.gov/legislature

Amid the frenzy of media doomsday real estate market reports, it's important to take a step back and look at the real numbers. The news media nay-sayers cry over and over about how our foreclosure rates have doubled nationwide, and homeowners in default have reached critical numbers. Well let's take a look at those numbers, shall we.

Nationally, foreclosures are up from .4% to .8%. Sure, they've doubled, but in total less than 1% of homeowners are in foreclosure. Woah, sound the alarms. Additionally, more than 97% of homeowners are paying their mortgages on time as agreed. Don't know about you, but this most certainly is not my idea of a crisis.

The line between news and entertainment is very much blurred. To say those who report the news are drama queens would not be far from the truth. The news media is paid by calling attention to themselves. The more people who tune in, the better the ratings and the more advertising revenue they generate. That doesn't always mean they are doing the public a service, unfortunately.

Has the mortgage industry impacted the real estate industry as a whole? Undoubtedly. Does this mean we're in some unrecoverable economic crisis that is going to throw us into some great depression? Well, only if the general public allows those queenie nay-sayers to negatively influence their decisions to buy and/or sell real estate.

On the West coast, real estate over the past 100 years has historically appreciated at an average annual rate of 10% per year. This means housing prices, on average, double every decade. That's a pretty solid return, which yields several percentage points above and beyond today's interest rates, which are still very low and favorable.

In the Puget Sound Region, while the market isn't quite as robust as it used to be, it is still very much active. For those who are waiting for the bottom of the market to fallout and prices to decline by 20%, you're in for a very rude awakening. That's highly unlikely to happen here locally. If you're waiting for the market to hit rock bottom, there is absolutely no way to measure the exact point in which this will occur until prices begin to rise sharply again.

The Seattle area market historically is one of, if not the, last to follow a national downturn trend and the first to feel an upswing. Further, we are fortunate to have not one, but two very high volume international seaports and a broad industry base that is still bringing a lot of new employees into the area. It is highly probable we have seen the worst of it already. Don't believe everything you hear or read until you have diligently gathered all the facts.

Your success is my business,

Brad Davis

The real estate industry has been flooded in recent years by flat-fee FSBO companies, discount brokerages and growing questions about agent commissions. What is the value of the single real estate agent and how does one measure it?

Over the years, the industry has seen many changes. There was once a time all agents worked on the sellers' behalf, whether they were perceived to be representing the buyer or not. This was likely due to agent commissions historically being negotiated between seller and listing agent/office. Still to this day the buyer typically doesn't pay out a commission.

Since buyers agency was established by the Washington State Legislature in the early 1990's, it has been made clear who is representing who. However, the question of commission continues to crop up.

Years ago it was a customary percentage of the first $100,000 and then bonuses on top of that. Then it became a bit more standardized/customary for 6% which was divided equally between the listing agent and buyers or selling agent.

In the last real estate market boom, many flat fee services began to spring up that would install a sign, lockbox and post listing information to the MLS. Additionally, discount brokerages began springing up. It was an incredible sellers market, and homes often had offers walk through the door before the sign was even in the ground.

The market has changed, but the questions around the value of real estate agents continues to crop up with sellers. Why pay 3%?

Foremost, I'd like to dispell some myths. Most agents do not capture their entire share of a commission. Often a large percentage is split with the acting broker where the agent hangs their license. This goes toward operational overhead and of course the broker's salary. Then there are transaction fees, franchise fees for most reputable brand name brokerage houses and of course taxes (federal and local).

Beyond the aforementioned, agents have their own individual costs for doing business. Marketing isn't cheap (e.g., signage, flyers, print and online advertising, etc.). Not to mention an agent spends hours of upfront time providing skilled, professional consulation about the marketplace to clients. Agents don't become skilled overnight. They put in many hours in continuing education, which they have to pay for out-of-pocket. Then there's mileage and equipment and the list goes on. At the end of the day the single real estate agent is lucky to have a 25% profit margin.

When it comes to selling one's home, there are many things to consider. Primairly, the first question that comes to mind is whether to work with a licensed real estate agent or to sell by owner. Here are the different types of selling scenarios/agents and a little bit about each one.

FOR SALE BY OWNER (FSBO): Statistically 80-90% of these "listings" end up conventionally listing with an agent. Clearly that must be an indication that real estate agents do provide some value add.

FLAT FEE LISTING SERVICE: These companies on average $500 to put a sign in the yard, a keybox on the door, print off some flyers and input your listing info. into the MLS. That's all they do, and they don't thrive in buyers markets.

DISCOUNT BROKERAGES: These companies charge around 1% for the listing side or about 4% in total. This undercuts the industry and is a business model built on high volume sales and not by referral. It wouldn't make sense for such companies to be in business otherwise. At the end of the day to they have the seller's best interest at heart? Or is it just about turning deals? Sometimes the answers are in the questions.

COLD CALL AGENTS: These are 3% commission agents that work more like the discount brokerages. They prey on sellers who really need to offload their property. They are only looking to work with motivated (a.k.a. desperate) sellers. They want to make a quick deal, and they are slick. They've learned how to overcome all the objections in the book. Are these agents looking after a seller's best interest? Maybe, maybe not.

BY REFERRAL/WORD-OF-MOUTH AGENTS: Then there are 3% commission agents that work on a referral-based business model. These agents spend their time working for their clients vs. chasing down the next several leads/deals. They are in it to win it with the client by providing such stellar service that the client not only becomes a client for life but also is inclined to refer their agent to friends and family.

So sellers, you have some thinking to do about what matters most to you in the end. Obviously bottom line is a concern. Is knowing and trusting who you're dealing with also important? Are you certain a discount service or agent is going to serve your needs and hold your hand every step of the way?

Real estate agents by in large have reputations along the same lines as attorneys, etc. Not very favorable. There's a reason for this. There are a lot of seedy, slick agents out there who just want to make a quick buck off of people. Then there are those who are professionals with high integrity who work in the best interest of their clients.

If the industry is going to change for the better, sellers and listing agents alike are going to have to decide where their values reside.

So how do you measure the value of an agent? That truly is in the eye of the beholder, which for the purposes of this column rests with the single seller. My advice to sellers: ask questions, lots of them. Gain a solid understanding of who you're dealing with and what you can expect from their services. Are they going to be prompt/on-time? Are they going to conduct broker and public open houses? Do you trust they know what they're talking about and that they're going to roll up their sleeves and get you the best deal in the most desirable timeframe possible?

Clearly agents hold a value, otherwise we would have disappeared long ago. As to what an agent's actual value is, only time and sellers will tell ...

Your success is my business,

Brad

For Sale by Owner (FSBO) is a risky proposition for the vast majority of homeowners. Sure, marketing and home repair are two items a seller could certainly be qualified to take on themselves. Here's a little known fact if you are considering selling your home yourself: In Washington State, real estate agents save the public hundreds of thousands, if not millions, of dollars each year over attorneys fees alone.

Real estate agents are specially trained to help limit and alleviate many risks involved with the purchase and sales process. These risks can and often do lead to costly and complicated law suits and legal battles if not properly averted.

Real estate agents are also covered by errors and ommissions insurance in the event something does go wrong. Let's face it, we don't live in a perfect world. If a buyer or seller had to go out of pocket for errors and ommissions, they could easily meet with financial ruin. In this case the real estate agent offers invaluable security.

Real estate agents are specially trained to work with multiple listings service purchase and sale contracts, which are currently being standardized statewide in Washington. We agents spend countless hours on legal updates and best practices so we can confidently guide buyers and sellers through the purchase and sales process, error free.

Regardless of a home's FSBO status, if it's listed on the MLS, more often than not a seller will be dealing with a skilled, savvy and seasoned buyer's/selling agent, which may limit the unrepresented seller in the negotiations process. This could cost them way more than they save by not having a conventional listing agent in the first place.

Before you consider selling your home by owner, do carefully consider the value a qualified agent can provide you. There's a reason why more than 80% of FSBOs eventually convert to conventional listings. Think again before you devalue the intrinsic value of the single real estate agent. He/she is the fool who represents themselves ...

Your success is my business,

Brad

Of course, if you're doing an all-cash deal, this subject is completely irrelevant. But for most, procuring a loan is a necessary part of the homebuying process.

Here are the top three reasons to get pre-approved before starting your property search:

1. Most sellers will not consider an offer without a pre-approval letter.
2. Most agents won't work hard for buyers who have not gotten serious about their financing.
3. Most buyers open themselves up to dissapointment by not knowing how much money they have to work with sans pre-approval.

A loan pre-approval should make the homebuying process much more efficient and effective. Often times mortgage pre-approval programs will handle the coordination of meeting all the conditions up front outside of identifying the property and having it appraised. This means you can focus exclusively on your property search knowing the price range you have to work within and having the confidence that your deal will close on time. It's as simple as that, really.

Your success is my business,

Brad

OK, so you're ready to move forward on getting finanacing for a purchase. Great! And you may even have a great finance specialist in mind to help you with your mortgage loan. Even better! But, do you know whether you're getting the best rate and term on the market? How would you know if you only receive information from one person or company?

Best thing to do is get another opinion or two. Comparison shop. Don't worry about hurting anyone's feelings. This is about getting you the best rate and term on the market, which can save you thousands of dollars over the life of your loan. There's always the alternative of not knowing whether your contact could be costing you or saving you more over the competition. How will you sleep then?!

If you are going to comparison shop, you do have to keep in mind that your credit score will likely have to be pulled. If your credit is pulled numerous times, this could reduce your score. The secret is to do your shopping within the same week. Within that one week timeframe the credit bureaus will see you are dillgently shopping around and this will not injure your score in the same way it would if you were to have your credit pulled over a several week time period.

Always get a good faith estimate so you can do side-by-side comparisons. If a mortgage professional is unable to provide you with a good faith estimate, this is a big red flag and you should respectfully thank them for their time and move on. These folks are required by law to furnish you an estimate in good faith.

Also, be sure you are comparing similar loan products. An adjustable rate mortage is going to differ in rate than a fixed rate mortage. So be sure you're comparing apples to apples.

Though this may cost you a little more time up front, this practice will likely save you thousands of dollars. If you do your homework and shop around, you'll be satisfied with the financing package you have going into your next deal so you can refocus your attention on finding the right property!

If you are interested in referrals to qualified mortgage professionals, I would be more than happy to refer. If you have any related stories to share about mortgage/lending experiences, feel free to comment.

Your success is my business,

Brad

You're just days from closing and no one seems to know where your loan docs are. What are you going to do now?!

First and foremost, please don't read your agent the riot act about this. It is not their fault. It is a financing/loan/mortgage officer issue. Of course if you're working with a good real estate agent, they will proactively step in to light fires in the approrpriate places to ensure expeditious handling of your transaction.

Unfortunately, sometimes this is simply not enough. It would behoove you to always have a back-up plan option in place in the event your financing falls through. Not to mention, it is always a good idea to get a pre-approval with more than one lender/mortgage professional. I recommend getting at least three good faith estimates (see Blog titled: Shopping for the best rate and term).

The good news is there are lenders that funds their own loans. Often such lenders can prepare docs in-house, which significantly reduces the timeframe for getting docs to escrow and getting your deal closed. The better news is we have such lenders in our local area.

If you do have to switch course for financing mid-stream, be sure to obtain a copy of your appraisal report from the original mortgage company and/or lender. You have a legal right to this information, and it will enable the new lender to not have to order a new appraisal, which would then cost you money in addition to time, which you likely don't have at this point.

If you decide to move forward with an alternate in-house lender, you may still be able to close your deal on-time with at least a one week lead time. If you have less time than that, your agent can go to bat for a closing extension. All's well that ends well, so be sure you have people working hard to make things end well for you!

For more information about in-house lenders or if you have a related experience, feel free to contact me or post a comment.

Your success is my business,

Brad