Melissa Loughridge Savenko

Here is an observation that has had me scratching my head since I got into this business.

QUERY: Why does the average consumer do more research before buying a television, or refrigerator, or car, than they will to find the person who will help them buy and/or sell a home?

It makes no sense to me, but it seems to happen all the time. Buyers pick up their agents at a random Open House, or by calling on a sign. Sellers choose their boss's daughter, or their work colleague's cousin, or the name they see most in the neighborhood, to sell their home. They don't bother to do research. They don't bother to interview. On the other hand, they'd be up to their elbows in website reviews and Consumer Reports before buying a toaster. I dunno, it just seems totally bass-ackwards to me.

The Realtor is the professional whose job it is to assist a buyer or seller in the most substantial business and personal transaction that most people ever do. For the vast majority of buyers and seller, their home will be the largest personal investment they ever make, and the most significant component of their personal net worth. That sales agent needs to have the professional skills to get the job done. You and the agent also also need to have a good rapport, because buying or selling a home IS a personal and emotional process. You may have to hear harsh feedback about your home, or the "come to Jesus" talk about what you can afford. A bad "fit" will make a challenging, often stressful, process even more difficult.

So, here are a few basic tips and recommendations on selecting your Realtor, whether you are buying or selling a home. These are just broad brush strokes, but I think it's a bare minimum of what you should consider.

1. Get referrals from family, friends, and work colleagues. Ask them who they have worked with in the past, and why they would, or wouldn't,recommend him or her. Referral is probably the best method for developing your initial pool of candidates.
2. Prepare a list of questions to ask, such as (i) what is the agent's familiarity with the neighborhood? (ii) How much experience does (s)he have in the business? and (iii) Why would (s)he be the best choice to work with you? Make sure to ask about specific things that are important to YOU.
3. Interview at least three (3) agents.
4. Outline YOUR specific expectations, and ask each agent how he or she would meet them.
5. For Sellers, ask each agent how they plan to price your house, how they plan to market your house, and what steps they will take if your house is not being shown. Get a written copy of each agent's listing presentation, including their marketing plan.
6. For Buyers, ask each agent about their knowledge of the market, including the geographic areas you are considering and the type of property you are interested in (single family home, condo, townhouse, investment property, raw land).
7. For Buyers, make sure the agent KNOWS THE AREA YOU WANT TO MOVE TO. And I don't mean he or she knows where it is on a map. Has (s)he sold houses in that neighborhood and if so, when and how many? Ask questions about the neighborhood that will reveal whether or not the candidate has experience in the sub-market you want to move to.
8. For both Buyers and Sellers, ask each candidate what creative ideas and tools he or she has in mind to help you achieve your ultimate objective.
9. Take a day or two to consider the candidates. Then make a decision. Inform them promptly, includingthe agents who did not get the listing or the buyer representation. Thank them for their time.

Does it take more time to do it this way? YES. Should additional time invested on the front end pay off by leading to a smoother transaction? Nine times out of ten, I predict yes. After engaging in this process, you should have more confidence in the person you selected, a greater willingness to listen to their professional advice, and rapport that will make communication, especially about the tough stuff, easier. So take some time, do it right....baby, we can do it, we can do it tonight!

(I know, I know, I'm a big dork).

Below is my very first blog post ever, pre-AR, on June 23, 2007. I recently got a comment on an AR post that suggested I'd get more responses if I had an actual profile picture, rather than just a silhouette. Perhaps. But this post might explain my struggle with what I call "the picture thing."

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I do not get it. I think the Realtor who decided his or her picture on a business card was a good idea should be taken behind the woodshed and given a good whuppin'. What the H-E-double hockey sticks were they THINKING????

What would you think if you walked into a lawyer's office and he handed you a business card with his face on it? How about an accountant? You would think they had lost their cotton pickin' minds is what you would think. You'd think the lawyer was an ambulance chaser and the accountant - Lord knows what you would think about the accountant.

Here's the true story. When I started at RE/MAX, my broker and I had a minor fuss about this. [First of all, when I say "fuss," I am exaggerating for effect. I may do that on occasion. Tom doesn't fuss]. But I argued against business cards with my face on them, while he advocated for such cards. "Why?" I asked. The answer was essentially "because every real estate agent does it." To which I replied "When I used to use that argument as a kid, my Dad would say, "'If all your friends jumped off a bridge, would you jump too?' [Dad, you should be so proud.]

Here's my thing. First, just because everyone does it, doesn't mean it's a good idea. Second, it's unprofessional. Other professions do NOT hand out cards with their mugs plastered across them. Have you ever gotten a card with a personal picture from a doctor, lawyer, architect, accountant? Don't we undermine OURSELVES as professionals by doing something so downright cheesy? Finally, for women, I think it is a potential safety issue. We real estate agents give people every possible way to get in touch with us except our home addresses - work phone, pager, cell phone, e-mail. In the age of Google, anyone could find your card, take a fancy to your picture, and that person can track you down, where you work, where you live. Trust me, I check the sexual predator registry every now and again - there are a lot of sick people out there, and probably a lot in your own neighborhood.

But frankly, the real reason is I think pictures on cards are cheesy and unprofessional. And don't even get me STARTED on the ladies with the glamour shot photos. Come on, y'all, I know sex sells, but don't we need to establish ourselves based on our skill and expertise, and not based on what we look like? I have a card from a very pretty agent that's got visible cleavage, and it just sends me over the moon. Tacky, tacky, tacky.

So, do I have cards with my picture on them? Yup, I do. Am I a hypocrite? I hope not. I have two sets of cards, very elegant embossed cards with the RE/MAX balloon logo in silver gilt, and a typical picture card. This is the result of a grudging compromise with my broker. The cards with my picture I give out to other real estate agents. That is a context where a picture makes sense - when you meet someone else in your industry and you want to remember them, a picture is worth a thousand words. And there are tons of real estate agents. Some could argue too many. But to potential clients and strangers I give the plain embossed logo card.

BUT, I refuse to get my picture retaken. People keep telling me I need to, I guess to "glam it up." Call it my own little defiant act.

The economic news continues to be grim. The equity markets have been in free-fall. Daily drops of "only" 300 points are heralded as a positive. The credit markets remain frozen. And more money is chasing commodities and government bonds, pushing yields on those investments ever lower.

One bright spot in this debacle? Oil prices have dropped, leading to dramatic price declines at the gas pumps. So there is SOME good news for the average American.

But what to do if you would like to make up some of that dramatic value decline in your stock portfolio?

I suggest you consider investing in income-generating residential real estate. Whether that means your "first" real estate investment, perhaps a small, modestly priced, single-family home, or your 50^th, in major multifamily properties, there are some amazing opportunities.

Please note, I am absolutely not talking about speculative real estate investment, like building custom homes for resale, or "flipping" homes for quick cash. Leave that to the professionals and the risk-takers. But if you have cash to spend, and a willingness and ability to invest time and/or capital up front, income-producing residential real estate might be the best game in town. Here are the Top 10 reasons why:

1. There is a glut of inventory. Supply far exceeds demand. The basic laws of economics mean this favors the buyer.
2. Even in a down market, some people have to sell. I crassly call this the "Three Ds" - death, divorce, disease. Add relocation to this list and you have the basic reasons for "irrational" selling, i.e., selling in a down market.
3. Investor-buyers evaluate real estate differently, and can identify overlooked opportunities. They are unemotional buyers. A home that doesn't appeal to the homeowner-buyer, who needs to L-O-V-E a property, could be a GREAT rental. If you can identify these undervalued properties, you can essentially "buy" equity.
4. Any necessary repairs or upgrades may depress a property's price artificially below what I call the property's "intrinsic value," what the home should be worth in good condition. If you can do repairs or upgrades, you can add value exponentially greater than the out-of-pocket cost.
5. Real estate is still a highly leveraged investment. In real estate, you need invest only 5%, or 10%, or 20%, of an asset's value in order to control that asset and generate income.
6. Foreclosures and job losses mean there are more deals, and even "steals," out there.
7. The macro-economic picture should mean a higher demand for rentals, as people are pushed out of homeownership by foreclosure or job loss, or delay homeownership to save a down payment.
8. Real estate remains a tangible, appreciating asset. Get a renter into a property and have that person pay to build your equity.
9. Income-producing real estate provides substantial tax benefits, including depreciation write-offs.
10. Income-producing real estate can be sheltered from capital gains tax liability in your lifetime through Section 1031, or "Starker," tax-deferred exchanges. Your beneficiaries get a stepped-up basis in the property when you pass.

Now, real estate investing is NOT for everyone. If you do not have the time or the inclination to deal with tenant issues. or the money to hire a professional property management firm to deal with those issues for you, rental real estate may not be for you. But if you have always wanted to give real estate investing a shot, and you have significant cash reserves, there are some amazing opportunities out there. Give me a call. I'd be happy to help you. [;)]

P.S. No matter what, USE AN EXPERIENCED BUYER'S AGENT who knows how to evaluate income-producing property! NOT your sister's best-friend's Mom. No offense to your sister's best friend's Mom, of course.

Well, I got radio silence in response to my October 10, 2008 post on dual agency. I'm actually rather surprised. I thought - and hoped - some more experienced agents might try to tell me why I was wrong, and why dual agency wasn't a bad idea. Oh well, I would have liked to have read the counter-point.

I'm going to pick up where I left off on dual agency. The example I was working with: you have a seller, with whom you have a listing agreement obligating that seller to pay you the standard 6% commission for the sale of the house, to be split 3%-3% with a buyer's agent. A potential buyer, UNREPRESENTED, walks in to your Open House, falls in love with the house, and wants to buy it RIGHT THIS MINUTE. I take the position that you shouldn't represent both the Seller and the Buyer, even though it's legally permissible to do so in Virginia. So what CAN you do?

First, you can write up an offer for the potential buyer, so long as that buyer understands that you represent the Seller's interests, and so long as you do not share any of the Seller's confidential information. In other words, you can commit the potential buyer's offer to paper, write it up with all the appropriate contract forms, and present it to your client, the Seller, for consideration. In this instance, the Buyer is merely a "customer," not a client.

[NOTE: I am not sure whether you can advise the potential buyer on non-price terms that might make the offer more attractive, like (i) a short closing timeline; (ii) waiver of inspections, or short inspection timelines; (iii) waiver of financing or appraisal provisions; etc. I feel like this is a grey area, and you might be able to say something general along the lines of "these types of non-price concessions are not atypical, here's how they work, they can make your offer more attractive." But it makes me uncomfortable, and I think you would have to be V-E-R-Y CAREFUL not to cross any lines. I wish Lem Marshall, General Counsel to the Virginia Association of Realtors and real estate legal expert extraordinaire, could clarify this with some of his wisdom....]

A second option is to refer the potential buyer to another agent, and for that agent to represent that buyer throughout the transaction. This is called "designated agency." Usually, an agent within the same brokerage becomes the buyer's agent, the listing agent being "designated" by the broker to represent the seller and the buyer's agent being "designated" by the broker to represent the buyer. For this to happen, the listing agent would say something like this to the potential purchaser standing in the living room frothing at the mouth to write an offer on his or her Open House property:

"Look, I represent the Seller in this transaction. If you want to be represented also, I can recommend someone who will do an excellent job representing you and advancing YOUR interests."

If the potential purchaser agrees that (s)he wants an agent, and (s)he would like you to recommend one, the listing agent then contacts the agent they would like to "designate" and negotiates a referral fee on that buyer-side commission, typically 20%-30% of the 3% buyer's agent's commission. Oftentimes, agents may have pre-existing referral arrangements, where they refer all of these types of referrals to one or two specific pre-selected agents. For example, this works well within the team structure.

Why don't most listing agents recommend designated agency in the "customer at the Open House" example? I think there are three (3) main reasons:

1. The lure of the entire 6% commission is strong, so listing agents prefer to (i) represent both sides as a dual agent; or (ii) represent the Seller ONLY, theoretically keeping the buyer as a "customer," not a client.
2. If the listing agent recommends designated agency, the potential buyer may get spooked, because they might assume you won't recommend anyone who is any good. But now the buyer has decided they really must need representation, so they choose to work with their brother's sister-in-law's best friend as the buyer's agent. The listing agent loses a potential referral fee.
3. Ignorance or inexperience. Some agents just don't know any better. But ignorance of the law is no excuse. If you violate your statutory or common-law duties to your client, the Seller, or if the buyer does not understand that you are not representing him or her and relies on your advice in the mistaken belief that you are advancing their interests, the fact that you didn't mean to mislead or didn't know any better ain't gonna get you off the hook with the Real Estate Board.

Here's the deal with designated agency. The potential buyer in this example, a stranger off the street who just walked into your Open House, has to trust you to recommend someone good. If they don't trust you, but you have now given them the song-and-dance about why representation in a real estate transaction is so important, they are going to find their own agent. And I'm pretty sure EVERYONE on the planet knows SOMEONE, usually several someones, who is a Realtor. So that potential buyer might just feel better with someone (s)he knows, even if just tangentially. And isn't that a reasonable conclusion?

But the problem, AGAIN, is that possible outcome creates an inherent financial disincentive for the listing agent to recommend designated agency. Instead, it creates an incentive to push for Option 1 above. And in my not-so-humble-opinion, Option 1 does not advance the buyer's interests in any way, shape, or form, but does advance the listing agent's interests, as well as the (deserved?) perception of Realtors as self-serving sleaze balls.

The fundamental problem here is real estate transactions are extremely complicated, extremely significant financial transactions. And most people, even very educated people, do not understand how a real estate transaction works. Is that any surprise? Joe Blow (I feel like I should say "Joe the Plumber") may only buy and sell 2-3 houses in his entire lifetime. To the general public, it's about finding the house you love at the price you're willing to pay. The mechanics of negotiating the deal, arranging the financing, inspecting, appraising, managing the sale to closing - that stuff is all pretty much Greek to many buyers and sellers, and they don't want to be bothered. The average buyers and sellers just want it DONE, so they can get into their new house and start decorating.

Because the general public does not understand how the compensation flows in a real estate deal, agents can take advantage of their clients' ignorance to benefit themselves. And unfortunately, it seems agents often do.

What's the answer? I dunno, but I have some suggestions. I think dual agency should not be permitted, period. [To convince me otherwise, I invite anyone to write a rousing defense of the benefits of dual agency.] Designated agency is fine, with appropriate disclosures. I think agents should be required to provide much stronger disclosures about their fiduciary obligations and who they represent. We need to make sure buyers are actually reading these disclosures. Perhaps there should be a 24-hour "review period" required after the disclosure documents on agency relationship are provided to the potential buyer. Why not make listing agents disclose their commission amount, and how much they make if there is no unrelated buyer agent on the other side? In fact, why not make listing agents provide a copy of the Listing Agreement to the potential buyer? Finally, I think the best and easiest way to nip this problem in the bud is for Sellers to refuse to allow dual agency in their listing agreements. There is a space at the bottom of our form Listing Agreement, Paragraph 5, "Compensation," that says the Seller permits the following types of agency: buyer, dual, designated, or "other." Just don't check "dual." Simple as that. Problem (partially) solved.

Thoughts, comments, feedback?

AGENT VS. SALESPERSON: WHAT IS THE DIFFERENCE?

The other day I posted my thoughts on dual agency, as it is practiced by real estate salespeople in Virginia. My opinion: It is actually impossible to represent both the buyer and the seller, EVEN IF the buyer and the seller are adequately advised of the consequences and sign all the appropriate disclosure forms. I chose the word "represent" intentionally, because I think representation requires affirmative action on behalf of your client. As an effective agent, IMHO, you should be developing terms for an offer or counter-offer, doing research to support that offer or counter-offer, constructing a rationale for the offer or counter-offer terms, and advocating your client's position in negotiations with the other party's agent. Then, once you have a ratified contract, you need to be managing that transaction to closing.

Notice I didn't say anything about finding these hypothetical clients the perfect house (buyer side) or marketing the house (listing side). In my opinion, finding a house for a buyer, or putting a house on the market for a seller, are the EASY, NO-BRAINER things that real estate agents do. The HARD things - structuring a deal, negotiating an offer, getting to "yes," and managing a contract to closing -are often not even considered when a potential client is selecting their agent. I think that is a completely bass-ackwards way to approach the interview process for a professional service provider. For example, on a "listing appointment" lots of agents will show the potential client the signs, the pretty brochures and the marketing pieces (s)he will produce for the home. My question? Who cares! Any brokerage can churn out that stuff, it all looks pretty much the same, and it has next to NOTHING to do with getting your home sold. Can that Realtor advise you on preparing your home for sale, pricing your home appropriately, dealing with obstacles in this challenging market - appraisals, financing, inspection issues - when you have a willing buyer and willing seller?

An agent in my office, who has been in the business much longer than I, and who I respect very much, made me start thinking about this issue. She pointed out that there is a difference between a salesperson and an agent. The SALESPERSON wants to get an offer on paper, to make the sale, to "seal the deal." They want their buyer to buy quickly, or their seller to sell quickly, so they can get that buyer or seller committed to a contract and they can move on. Oftentimes, once there is a ratified contract, the salesperson hands over the file to a transaction manager and has very little involvement in getting that purchase or sale closed.

The AGENT, on the other hand, is actively working with the buyer or the seller, trying to understand their needs and motivations, sharing their expertise to help that buyer or seller make the best possible decisions, and helping their client get the best possible ultimate result - either getting the buyer into the right house or maximizing the seller's profit while meeting that seller's other objectives.

Getting a buyer into the right house may mean advising them AGAINST a particular purchase. For example, a buyer may not be able to afford the house they really, REALLY want. Maximizing the seller's profits may mean hard negotiating to get an offer price up, or creative structuring with non-price terms to otherwise advance that seller's objectives. It isn't beating up a seller to take a low-ball offer, so you can get your commission and move on down the road.

In my real estate practice, I have run across a lot of great salespeople, and some great agents. I'd rather try to be the latter. That may mean I don't seal as many deals. I've got buyers that I have been working with for just A-G-E-S, and I probably could have pushed them into a contract...or two, or three....by now. A better salesperson than me certainly would have. I'm not going to get as many listings as the top Realtors in my area. I'm terrible at the cold-call and frankly just don't want to do it. I won't "buy" a listing by giving a seller a sky-high list price, and then recommending a price reduction almost immediately after the listing agreement is signed. I'd prefer my sellers find me because of reputation or referral.

I think I'd make more money if I learned how to be a "closer," and focused on being a better SALESPERSON. But I'd rather work to be the best d*mn agent I can be. Goodness knows, I've got weaknesses I can try to improve. I need to figure out how to systematize my communications with both my buyer and my seller clients. I feel like the sellers get a bit neglected, with a "silence means no news" sort of approach, because the buyers' needs are so time-intensive. If I were a seller, I'd want periodic updates. I haven't been able to execute on that goal yet, which makes me frustrated and disappointed with myself. I know I get busy and I get sloppy - both literally and figuratively. Trying to juggle buyers, sellers, and prospects, AND running my household and taking care of my daughter, gets overwhelming for me. And I tend to be my own worst critic, so I beat myself up for the things I am not doing well.

I wish I had a detail-oriented assistant to keep me on track and on time, and to whom I could off-load much of the administrative work. But that would require me to make more sales....[:)]