Arizona’s Anti-Deficiency Statutes to Remain Unchanged

As a result of legislation that was signed by Governor Jan Brewer last week, the Arizona Anti-Deficiency statutes will remain unchanged.

Earlier this summer, the Governor signed SB1271, which effectively changed the rules on how and when lenders could pursue a borrower after a default of a mortgage loan. The statutes have been in place in Arizona for decades, and they protect a residential homeowner from being sued by a lender after a default, such as a foreclosure. With those statutes in place, after a lender foreclosed against a homeowner, in most cases, they were unable to pursue the homeowner for the deficiency. SB 1271 would have changed that, and many of the provisions of the bill were ambiguous as to the definition of a resident or occupant. This ambiguity could have thrown thousands of homeowners into a situation whereby they could have faced additional costs after a foreclosure.  Thus, The Arizona Association of Realtors along with many other consumer groups lobbied the Governor and the Arizona Legislature to draft legislation to repeal 1271 before it went into effect on September 30,2009.

The Arizona Legislature and the Governor did just that. During a special legislative session this summer, HB 2008 was drafted and approved and Governor Brewer signed the bill last week. HB 2008 repeals SB 1271 and its change to the anti-deficiency statutes; thus, the statutes remain as they were.

Are you confused by the HVCC (Home Valuation Code of Conduct)? Don’t feel bad, most people are. This new rule went into affect May 1, 2009 and has done nothing but create havoc for all concerned in a typical real estate transaction.

The original intent of the rule was to create a separation between a lender and the appraiser, so that the lender would not exert undue influence on the appraiser to appraise the property for more than it was worth. Sounds good on paper, but on the street it creates confusion and tension between lenders, buyers and their agents. NAR has lobbied Congress to impose a moratorium on the rules, so that everyone could obtain a better understanding. As of this date, the rules are still in place.

Without going into the complicated and gory details, there is one misconception that impacts agents. Many believe, since they have been told this, that they cannot talk to or interact with the appraiser, give them comparables or assist them in any way. That is flat-out; not true… The HVCC does limit the lenders ability to talk to the appraiser, but does not limit the agent’s ability to do so. Thus, we may still meet the appraiser at the property, provide them comparables or other data and assist in the process. We may provide updates comparables after an appraisals is done, just as we always have. If you attempt to do just that, and the appraiser tries to stop you, remind them that the HVCC rules allow for this.

Our National Association has an excellent flow chart dealing with the HVCC and can be found at http://www.realtor.org/wps/wcm/connect/f57e63804e57784890e4b3d4f1772a7a/HVCC+Flyer+6.16.09.pdf?MOD=AJPERES&CACHEID=f57e63804e57784890e4b3d4f1772a7a

As a listing agent, getting listings on short sales can be challenging. With so many variables and every lender acting differently, it can be daunting to stay on top of all the issues. While there are so many steps to insure that a short sale transaction moves smoothly, I could never cover them all here. Yet, one issue looms large and if not done properly, could cause you considerable grief and aggravation possibly resulting in a failed transaction.

The issue is obtaining the HUD-1 that the lender will require when considering a short sale transaction. Most often, the process starts with you going to a title company and asking for a short sale HUD-1. With that request, most title companies will simply ask you and/or the seller about the current liens. Since the seller owns the home, they should be the one to answer those questions. So, let’s assume the seller tells the title company that they have one lien; that being the lender who is considering the short sale.

Thus, the title company prepares the short sale HUD-1, most often without doing a title search, and shows the liens that the seller tells them about. That’s the problem. By not doing a title search, and by not grilling the seller with questions which might uncover additional liens, the HUD-1 is prepared with incomplete information which is a recipe for doom. 

If done that way, the lender approves the short sale and everything moves forward. The buyer deposits their money, pays for an inspection, appraisal, and loan application and incurs various other costs, while assuming they are buying the house. Low and behold, much later in the process, the 2^nd lien pops up, typically a Home Equity Line of Credit (HELOC) or some other lien, which the seller either forgot about or did not realize was part of the transaction. Closing is delayed as the 2^nd lien holder is contacted and typically offered pennies on the dollar. Many of them say no, and the deal fails.

Is there a lesson to be learned? Yes. When ordering that HUD-1, either insist that the title search is done in conjunction with the preparation, or very soon thereafter, so that if another lien shows up, everyone will know about it long before the 1^st lender approves the short sale and the buyer spends any money. If the title company refuses to accommodate that request, find another title company, as some do this as a matter of course, but many do not.

If so, the Federal Tax Credit for 1^st time homebuyers, of up to $8000 will come to an end on November 30. With September almost here, that gives buyers about 90 days to find a house, write an offer, get an accepted deal, have it financed, get it closed and have title transferred all before the November 30 deadline.

You might think that is plenty of time, but keep in mind the typical transaction now is either a short sale or a foreclosed, lender-owned property. Either could take weeks to obtain an accepted offer, with more time needed for repairs and other issues. The typical 30 day from offer-to-closing contract is a thing of the past, at least for now.

Thus, a typical 1^st time homebuyer might need to make numerous offers and then do it all again if an appraisal comes in lower, repairs are overwhelming or any other reason why a sale might fall apart.

Remember that the federal program offers a tax “credit”, not a deduction. There is a difference, but be careful in giving tax advice to your buyers. If you have any serious, potential 1^st time homebuyers, then have them first visit with their accountant to determine the benefit available to them at this time. Once they are comfortable with that, then start showing them houses.

A word of caution; be careful what you promise… Promising the credit to a buyer who ultimately does not receive it will be an issue you will need to defend. Always tell your buyers that they must comply with the federal requirements and that you have no control over how the credit is applied. For example, if you sell them a house with a November 30 closing, and for some odd reason, it closes December 1, they will not receive the credit. If you promised they would, you could find yourself if a very uncomfortable position.

It’s the words of a song, and a popular phrase, and it certainly pertains to some listings that you might have. Some of them are flat-out un-saleable. You just might not realize it.

What is your time worth? Once you know that, you will work to avoid those situations that take up your time and do not provide revenue.

The current market of lender-owned and short sale properties, coupled with many sellers being in bankruptcy often creates a situation where the property that is owned is un-saleable. Here are the more common reasons why and the reasons why you should think of “folding” and moving on…

1. Uncooperative or uncommunicative seller. In short sales, the sellers are often frustrated and worried, and will be less willing to cooperate. In either case, such as making certain disclosures or not paying some of the buyer’s costs might render the property un-saleable. If the seller has dropped out of sight, does not return any calls, e-mails, faxes or any other means of communication, you might need to walk away.
2. Seller turns down reasonable offers. You know what’s reasonable. No matter what the list price is, if your seller refuses to accept a reasonable offer, or at least provide a reasonable counter-offer, that might be time to cancel the listing. Give this stronger consideration after the seller does this more than once.
3. Sellers are divorcing, fighting or not agreeing with each other. Certainly, sales can occur with a divorce situation, or sellers who are arguing with each other. But, at some point, when the situation becomes untenable, when you are constantly being put in the middle, you need to think about your options. When one divorcing party clearly defies a court order and does not cooperate, or one sibling has made it clear that they will not agree to sell mom and dad’s place, it might be time to throw in the towel.
4. Sellers refuse to be reasonable on pricing or making repairs. Pricing today could be a moving target. If the seller does not agree to price adjustments to reflect the current market, and activity is slow or nil, then you might be wasting your time. If the seller refuses, either now before a contract, or in response to a contract, to make even the slightest repair, then it might be quitting time.

We never like to lose a listing. It often feels like failure. But in many cases it is not your failure. It is the seller. If they put you in the boxing ring blindfolded with your hands tied behind your back, how do they expect you to win the fight? Without their cooperation and assistance, you might just be wasting your time.

So, measure each listing with the above factors, and if the decision is to cancel the agreement, first confer with your broker to determine how you accomplish that.

For certain, the Phoenix real estate market has seen both sides of the emotions; either a rapidly declining market fueled by negative economic news, a downturn in employment or rising interest rates, or an increasing market pushed on by available money and eager buyers. Is there a middle ground for a normal real estate market? Some say yes, but that lasts almost as long as an ice cube on the sidewalk in Phoenix in July. (About 5 minutes).

In reality, Phoenix is most often a stable market, either on a moderate rise or a gentle pull-back. Rarely do we see the markets we saw in 2005 and 2006, when builders could not build them fast enough, lenders were pushing money to anyone who literally had a pulse, and sellers who saw their values increasing by the day. That was an oddity and most likely will not occur again for quite some time. Contrast that to a market we have been in for the better part of 2 years with an increasing inventory due to foreclosures, lenders pulling back and not making loans and sellers seeing a rapid decrease in values. The fuel to that fire is the fact that many borrowers in 2005 and 2006 obtained teaser rates at 3% or lower, paying only interest. Often, buyers ended paying less for a mortgage for a big house than they were paying for rent on a small apartment. That was very attractive. They never projected that they could not re-finance in 24 months when the rates changed. Lenders promised to refinance as the values would continue to increase 20 – 30% a year. Well, we all know that the values went in the opposite direction, and many of those borrowers have subsequently lost their homes.

So, where are we now, in the middle of 2009, and most likely at the beginning of the climb out of the bottom.

Here’s why we feel we are climbing out…

May, 2009 saw 9760 sales in the Phoenix Metropolitan area. That was the 3^rd highest sales month in 5 years. (Sales are contracts in escrow waiting to close)

May, 2009, the existing inventory in the MLS system was 44,772 on May 31. It was 55,904 on January 1.

Some caveats to the improvements in the market.

1. We expect an increase in foreclosures through the summer and into the fall. Lenders sat back after the moratorium last winter and started the process up again in the spring.
2. Stricter FNMA and HUD regulations have slowed the lending process, causing frustration among buyers and sellers and causing deals to cancel.
3. Government regulations such as the HVCC laws (Home Value Code of Conduct) have hamstrung appraisers, lenders and agents with a bevy of convoluted regulations that befuddle many buyers and sellers.
4. Local statutes or regulations, such as revisions to a statute here in Arizona that relates to mortgage deficiencies, can cause confusion and in some cases panic among homeowners. While good intentioned, the net result is a law that places an unfair burden on homeowners in default. 

Thus, we are cautiously optimistic, seeing more lenders willing to loan, more buyers ready to buyer, foreign investors buying with cash and available inventory for them to buy. Lenders who have foreclosed have become more realistic in pricing, willingness to do repairs and incentives to the buyers. We are confident that we are climbing out of this hole and will return to a normal, stable market by the spring of 2010.

SUMMARY OF S.896, TITLE VII-Protecting Tenants at Foreclosure Act of 2009

On May 20, 2009, President Obama signed into law a mortgage rescue bill that included the above referenced Act.  In short, any foreclosure of a federally-related mortgage loan or any residential real property foreclosed on after May 20, 2009 is impacted by this Act.

The major change to existing Arizona law is that arguably any successor in interest to such property shall assume the interest in the property subject to the existing bonafide lease.  If that lease was entered into by anyone other than the mortgagor or the child/spouse/parent of the mortgagor, that lease was entered into more than 90 days before the notice of foreclosure, the lease was the result of an arm's length transaction, and the lease requires rent substantially the same as the fair market rent, then that tenant shall have the right to continue to reside in the unit under the same terms and condition of the lease.  The tenant must pay rent, permit access pursuant to ARS 33-1343, etc.  If they do not, the new owner has all rights and remedies under the lease and Arizona statute.

There is one major exception:  In the event that the new owner wants to occupy that unit as their primary residence, the owner must give the tenant a 90 day written notice of termination of the existing lease.

If there is no written lease or if the tenancy is month to month, the new owner must give the tenant a 90 day written notice of termination of the tenancy.

Section 8 leases are subject to this law.  However, short sales are not.  Additionally, the tenant has no rights under this Act until and unless the home is foreclosed on, the loan was a federally related loan, the lease was in place at least 90 days before the foreclosure, and the lease was an arms-length transaction for at least market rent to someone who is not the owner's child, spouse or parent.  Simply receiving notice of a pending foreclosure does not trigger this Act.

Is that true? In Arizona, do we see a significant slow-down of sales when the temperature climbs to 100 and above?

Not necessarily. While some agents feel that the heat stops people from looking at homes, that is simply not true. Our market is truly a 12-month market, certainly with peaks and valleys. April historically is the strongest month for real estate sales, both locally and nationally, while December is the weakest month. The strength of April is generally associated with weather; as the northeast and other parts of the country start to thaw out, those that hibernated in the winter come out and start looking. December, however, is not weather-related. It is that time of year from Thanksgiving to New Years where people are simply focusing more on family, gifts, etc and not real estate.

June, July and August are statistically strong months in Arizona. And, this year, we predict it to be even stronger, as several factors are in play. They are…

1. The market is coming out of a severe downturn and by simple timing, is improving.
2. Home prices have not been lower in decades, and many buyers are getting into the market.
3. Lenders, while actually tightening the rules, have money and are lending. In this market, however, someone needs to have a strong credit rating and a down payment in order to qualify. Believe it or not, lots of people do and they are ready to buy.
4. Investors are still grabbing foreclosed properties and placing them in the rental pool, believing that since many people cannot qualify to buy will still look to rent.

As a result, we expect a strong 3^rd quarter for 2009 going into the fall. While lots of real estate agents take the summer off, or a considerable amount of time, those staying in town and working are the ones that will grab these deals.

This news article was sent to us by Mike Neill, American Alliance Mortgage Company. You may reach Mike at  mike@aamcbank.com

NEW YORK – A record 12 percent of homeowners with a mortgage are behind on their payments or in foreclosure as the housing crisis spreads to borrowers with good credit. And the wave of foreclosures isn't expected to crest until the end of next year, the Mortgage Bankers Association said Thursday.

Federal Lead-Based Paint Disclosure. This is a federal rule and lenders are not exempt. Although they will try and cite the exemption to the rule that states it is not needed “…in foreclosure transactions…” they fail to realize that they are misinterpreting that rule. When they foreclose on the property; THAT is the foreclosure transaction. But, when they sell it to your buyer, they are not exempt and if the property was built prior to 1978, they must provide the disclosure.

Septic Certification. This is a state law that went into affect a few years ago, whereby upon transfer of title, any property that has an in-service septic tank must have the tank inspected and serviced and thus, certified before title is transferred. This is a statutory obligation of the seller, even a lender who foreclosed, to provide that certification, and the agents should be proactive in getting this accomplished.

Affidavit of Disclosure. Another state law, that went into affect around 2002, which requires a seller of real property that is in the county (not in an incorporated city) and never subdivided, to provide a disclosure statement to the buyer as to certain information regarding the property. The actual form itself is required by statute, so the seller must complete and sign it, have it notarized, provided to the buyer 7 days before COE. Our AAR purchase contracts change that last part to 5 days after acceptance. Once completed and signed by the buyer, the Affidavit must be recorded.

In all three cases above, the seller is obligated to provide the disclosure or service, and they cannot be waived. Even if both parties agree to waive either their rights or obligations under a statute, any such waiver would be deemed unenforceable y the courts.

Thus, the agents; both listing agents and buyers agents, must be aware of the necessity of any of the above, and be instrumental in making sure they are completed and delivered to any buyer.

Technology scares many people, including real estate agents for many reasons. Are you one of those that are intimidated by technology? Probably not, if you are reading this blog (on a website). But, are you using all the tools you could without maxing out your credit cards?

When a new agent joins the business and asks, “how much will it cost to get started?”, most brokers and managers respond with the typical answers… schooling, testing, license fees, start-up fees to the broker, the local association, MLS etc. What is often overlooked are the costs for the necessary basic tools to get started. Agents often think in terms of what type of car, what clothes they need, etc, yet so often a new agent is not guided on the levels of technology that would help develop a career quicker. Waiting to make enough money to buy the needed tools would be like receiving a prescription for a needed drug but not filling it.

We asked an expert on real estate technology, Jeffrey Raskin, to give us the three levels of technology that an agent should look at.

Bare minimum essentials: (total cost averages $1100 plus monthly fee for internet and cell phone usage)

• A home computer with high speed internet access and a printer (preferably with a fax built in)
• A decent point and shoot digital camera
• A cell phone (you probably already have one, but be careful to separate business and personal) with basic voice service. 

More sophistication and use: (total cost averages $2700 plus monthly fee for data plan)

• Replace the home computer with a laptop computer. (or add the laptop)
• Replace the point and shoot camera with a single lens reflex digital camera
• Add a smart phone for your business line (remember, separate business from personal) for access to e-mail, Internet, downloaded material. (would need a monthly data plan with the phone).

Top of the line: (total cost averages $3500 plus fee for fax service)

            Tablet or notebook computer allowing digital signatures

            Full function scanner

            Add e-fax service

            Add a high quality (HD) video camera

Here are some other tips for professionalism with technology:

• Your voice mail message should be clear and short… No music or background noise. Don’t allow your voicemail to fill up.
• Don’t use your home or personal phone numbers. You do not want children or visitors answering your business calls.
• Use a profession e-mail domain; either your server (such as mine, jon@desertsageseminars.com) or your brokers’. Avoid using the web based free programs such as Yahoo, Google, Hot Mail or MSN, since your clients will believe that you are not professional enough to have your own.
• Use a professional e-mail address, such as your name at your server or broker. Avoid complicated, lengthy addresses or those that could be deemed unprofessional. You want people to remember your e-mail address. One such as the#1bestagentphx@yahoo.com sends the wrong message.

Once you buy any tool, you must have the drive and commitment to learn how to use them to the fullest. In the Phoenix metro area, Jeff Raskin offers classes on technology and the use of most of the tools we have described here. Visit Jeff’s website at www.technology4realestate.net  or e-mail him at jraskin@usa.com for information about his classes.

§         When using a non-occupant co-borrower, such as parents, the occupant borrower is not required to have any income or assets of his/her own.

§         2 to 4 unit owner-occupied properties are eligible for 96.5% financing at the same interest rate as 1-unit homes.

§         Mom and dad can lend, (as well as gift), some or all of the money for closing, and put a second lien against the home that exceeds 100% Loan to Value (LTV = Loan Amount/ Home’s value) Note:  The $8,000 First Time Home buyer Tax Credit can be used to pay Mom and Dad back!

§         FHA has NO declining market policy reductions in LTV.

§         Seller Contributions.  The seller (or other interested third parties such as Real Estate Agents, builder, developers, etc., or a combination of parties) may contribute up to six percent of the property’s sales price toward the buyer’s actual closing costs, prepaid expenses, discount points and other financing concessions.

So, you took a listing on a potential short sale, and the seller’s lender is acting as if they are in control. Are they?

Well, to some extent, yes. While your seller still owns the house, will sign any contract, deed and closing papers, their lender will say yes or no to the deal. Since we are asking the lender to accept less than they are owed, they can say no to deal, thus stopping the sale. Thus, they often act as if they are in control, since they do control that part of the deal.

Your seller will have some control once/if the lender approves the short sale. The lender might require something from the seller that the seller cannot or will not comply with. At that point, the seller could say no and cancel the deal.

In essence, the seller’s goal should be to sell the house. To do so, they must get their lenders approval. That might mean giving up some control, and if so, if that accomplishes the task at hand, then so be it. Control is important, but not everything.

Always keep in mind; as the listing agent, your client is the seller, not their lender. You should follow any instructions from your seller, yet might be reluctant to follow any from the lender. If the lender puts any obligations on you, be sure to discuss that with the seller before proceeding.

Do you feel like you are working harder for less money?

Does it feel like every deal takes more and more time?

If so, you are not alone, and you are correct in both. We are working harder for less money, and, time grows shorter as each deal takes more time. Here are some ways you might be able to overcome those issues.

1. Time management. Yes, that phrase again. In a lifetime of one or many careers, we have hard the concept over and over again. But, if ever it was a critical tool, it is now. Imagine years ago you learned to be a juggler. Get to three balls in the air, and you were good. Juggle four bowling pins, and the circus hired you. Now, a juggler, just to get an audition, needs to juggle a bowling ball, a sword, a chainsaw, a lit candle and an orange, all at the same time. For the same or less pay. Do you feel like that juggler?

Managing your time will help soften that blow.

Plan your day. That’s right, write it down. Use a calendar, and be sure to allow enough time for each activity. Do not overlap and leave time for personal issues, such as; do you need to go to the bank, pick up your dry cleaning, etc.

2. Avoid activities that steal time from you. Sounds simple enough, but many things in a day can cost you time. Once you are determined what needs to be done, often other people can waste your time. It is a fine line between managing your time effectively and insulting other people; but, someone stopping you to waste your time is no different than them reaching into your wallet and taking money from it. Not so easy, but once you master it, you will be more in control of your time.
3. Delegate… get some help, even from your family. Have someone else handle the mundane items, such as submitting ads, paperwork to your broker, and other issues that you must do but does not create buyers or sellers.

Given that each listing and sale takes more time to generate and close, you need to take more time to work on them, therefore using good time management skills and planning your actions will allow you to be more productive.

It might come as a surprise to many homeowners when the letter arrives. They have good credit and a high FICO score, only to learn that their lender has suspended their Home Equity Line of Credit (HELOC). Even if the homeowner has no balance on their HELOC, many lenders have taken a broad-brush approach by looking at the overall market and not the individual owner’s credit rating. This might affect the homeowners current or future plans to remodel the home, take a vacation or send a child to college. Lenders are concerned that as real estate prices fall in certain markets, many owners have a combination of the 1^st mortgage and the HELOC which now exceed the value of the property. While a lender would always have the right to suspend a HELOC, many lenders have looked at a city, a zip code, a county or even an entire state, and have sent letters to owners telling them not to use the checks or debit cards that were provided when the HELOC was issued.

Lenders such as Bank of America has looked at zip codes through several market value programs and has sent letters to those owners who are in a market that has declined more than 10%. In addition, the guidelines for obtaining a new HELOC have changed. In prior times, most lenders allowed a 1^st loan and a HELOC to reach 100% of the value of the property. When the owner obtains a 90% 1^st loan, and a HELOC for 10% of the value, that would total 100% of the value. Now, many lenders will only allow HELOC’s and the 1^st loan not to exceed 80% of value. The lender wants the 20% “cushion” in case values of property fall.

The homeowner really has no recourse, as the lender includes language for suspension in the loan paperwork a seller signed.

So, be sure to read all letters and other communications from your lender, in case they send you such a letter.

In today’s current climate of short sales and lender owned properties, there is an ever-increasing downward pressure on commissions being paid. In so many cases, brokers representing buyers are finding that the co-broke commission that was originally offered in the MLS was reduced somewhat and often significantly at close of escrow.

Certainly, there may be an issue with the listing broker owing additional commission to the selling broker, yet that process could take months to resolve with an uncertain outcome. The process is arbitration through the Association of Realtors, which up front requires a deposit, sometimes reaching $500. If you ultimately win, you get that deposit returned. But if you lose the case, you also lose the deposit.

So, how can you insure that you will receive the full, anticipated commission at close of escrow? Have the buyer execute an Exclusive Buyer Retainer Agreement, whereby the buyer would agree to pay you a commission if the listing broker does not offer one, the seller does not offer one, or if the agreed upon commission changes.

There tends to be a resistance in the real estate community to bind the buyers to an obligation to pay a commission. That resistance tends to come from years of doing it one way, which was relying upon the listing broker to pay the commission and not involve the buyer.

But, times have changed. Not only is there pressure on our commissions from the listing side, we have to ask ourselves; “Are we entitled to be paid if our buyer buys?” Many agents fear that if presented with such an agreement, most buyers will bolt and find another agent.

That is simply not true. Explained properly and thoroughly, a buyer should understand that you do not work for nothing and that you have a right to make a living. With such an agreement, most buyers would have no exposure anyway, if the listing agent pays what is owed. The buyers would only have an obligation to pay you if you end up with less than what they agreed to pay you, or if they wander out alone and buy something without you.

So, for example, let’s say you tell your buyer that in signing the form, they agree that you will receive $10,000 for any property they buy. If you sell them a listing that offers $10,000 and you receive that, the buyer owes you nothing.

If you sell them a listing that offers $8,000, and the buyer knows that when you show it, then they would owe you $2,000 at close of escrow.

If you sell them a FSBO who refuses to pay you, and they know that, they would owe you $10,000 at close of escrow.

Just like a listing agreement, a Buyer Agreement is a contract whereby the buyer would owe you commission if they buy and the listing broker or seller does not pay you. In a listing, the seller would owe you a commission if the property sells. Why not have the same assurances to be paid for your hard work from the buyer?

The choice to use this form belongs to you and your broker. Be sure your broker supports your use of this form and also be sure to know what rules your broker imposes in such usage.

Real estate agents often take the path of least resistance when it comes to generating new business. While many agents flourish in a good market, those same agents often flounder when the market turns rough. Why? Simple. Those agents allow business to come to them, albeit often with some reasonable marketing efforts. That works fine in a strong market; but could spell doom in a down market.

Here are some key tips to ride out the storm and stay busy in all markets.

1. Have several sources of business at all times. Building a base of business on one source might work well for a while, but if that source becomes exhausted, or stops producing, you are out of business. Focus your marketing efforts on at least 3 sources of business, with sales and listings coming from all 3. Then, if one or even two sources slow down, you still have another producing income. An example of 3 sources might be 1. Prospecting your past clients, friends and relatives, 2. Work a large geographic farm and 3. Prospecting first time homebuyers, For Sale By Owners or expired listings. Doing all 3 well might help you ride out a bumpy market.
2. Stay on top of trends. Look for opportunities that might be around the corner, and be prepared to move quickly. In a market with falling interest rates, more and more first time homebuyers would be ready to buy. Seeing that coming and preparing for it puts you ahead of the competition. A slowing market and declining values often brings a higher level of foreclosures. Develop relationships with several lenders so that when they are ready to list those properties, you might be near the top of the list.
3. Never stop prospecting. No matter how the market shifts, it will come back around. Yes, you might need to continue spending money to do that, but any business requires on-going investment. While some buyers and sellers will make instant on-the-spot decisions on which real estate agent to use, most will make a decision to use a Realtor and will consider who they have seen or heard from the most. Consistency and repetition builds your business.

It is not impossible to stay busy in a down market; it simply requires focus and perseverance. With several sources of business, it would be odd that all sources would slow down at the same time.

Your mental attitude will have a lot to do with your success. If you believe the market is bad and there is no business, you are correct! If you believe that there is business to be had, again, you are correct.

Does this sound familiar? You represent a buyer, and you have an accepted offer on a lender-owned property. In their counter offer, the lender stated that they are not responsible for utilities, and if the buyer wants utilities turned on, they must do it themselves. So, that puts you in the position of either helping the buyer do that, or worse, you do that for them.

Here’s the rub… neither you nor the buyer own that house, and really do not have authority to enter the premises and turn on utilities. Yes, the lender said in their counter that they would turn them on, but still, that puts the buyer and the agent in a real bad position, since the lender technically did not authorize the buyer to turn them on, nor does the lender indemnify the buyer if something goes wrong.

Case in point… Buyer’s agent arranges for water and electric service to the property. Buyers FHA appraisal required the pool to be filled and running. Agent shows up the afternoon both of those services were to be set up. He sees the water meter, turns on the main valve. He then turns on the main circuit breaker to the house. The agent proceeds to his car, picks up the hose in his trunk and walks to the rear yard. He connects the hose, turns on the faucet and drops the hose in the pool. He then returns to his car and sees water running down the driveway. This all occurred in about 7 minutes. He immediately turns off the main valve, goes through the front door to find most of the downstairs flooded. Someone left the hot and cold faucets for the washing machine in the laundry room turned on, and when he turned on the main valve, that immediately started flowing. By the time he realized it, the house had a good inch or two of water everywhere.

Who pays for the damage? The agent, and his broker, and their E & O carrier. The agent damaged someone else’s property, so the agent would be liable, and technically, entered that property without authorization nor indemnity.

I heard of another case where a previous occupant left wires crossed in a ceiling when they pulled out a ceiling fan. By the time the agent got into the house, the crossed wires sparked before the circuit breaker shut it off, and that spark ignited something in the ceiling. By the time the agent realized it, the entire ceiling was on fire. Again, damage in someone else’s property that the agent caused, thus; the agent, his or her broker and their insurance carrier will be liable.

Bottom line… as a buyers agent, stand your ground and either require that the seller have all utilities on for inspections and walkthrough, or cancel the contract. When enough buyers cancel these deals, the lenders will realize their obligation and turn on utilities in the properties they own.

You might remember that line from a movie. Ahh, but what movie?

Most people think it comes from “Alien”. No, it comes from “The Fly” (the 1986 remake with Jeff Goldblum and Geena Davis). The scene has two women and a man. The one woman, fearful of doing something, says, “. ..But I’m afraid…” The man says, “No, don’t be afraid…” and the other woman says, very sternly, “Be afraid, be VERY afraid”.

This brings to mind the fear and paralysis that affects some real estate agents who fear the unknown. I have talked to so many agents who tell me “… I refuse to do a short sale or lender owned deal”. Why? They are afraid of the unknown, but the difference here, versus the movie, there is nothing to be afraid of. What most agents fear is the process, which is unknown to them, and sadly they have heard the horror stories and use both of those factors to take that position.

As a result, they are staying away from a large segment of our current market, which likely will stay that way for most of 2009. We will see more foreclosures before we see less, especially with the government-imposed moratorium being lifted last week; thus the sheer number of pre-foreclosure and lender-owned sales will increase. If you are fearful of that part of the market, you might be out of business.

So, if you decide to go after those foreclosed, lender-owned listings, you should answer these questions.

First, are you going to work harder for potentially less income? Yes. These deals take longer, require more documents and certainly require patience. With prices at a record low, and pressure on commissions, your income will be less. That’s a fact, but there is not much we can do about that.

Next question. Will I lose some control of the deal? Yes, as lenders make their own rules, we need to far-more flexible in dealing with many of our standard rules. Your brokers are here to help you with that.

Last question. OK, how do I get these deals? How can I get listings from lenders? This takes work, good ole prospecting. Talk to every mortgage broker and title officer you know. They deal with lenders and asset managers every day. Ask for names, or have them put in a good word for you. It’s just like prospecting for listings. Knock on doors, call people, and make yourself known. Lenders are assigning hundreds of listings to real estate agents all over the valley every day. You might just get in front of that person (or on the phone) on the right day, when they need another agent. Timing is a big part of success. You certainly won’t get these listings unless you prospect for them every day.

Remember when you started in the business? Did your phone ring the first day, with a buyer ready to buy, or a seller ready to sell? Probably not. Think of this as your first day in the business. What should you do to generate leads?

Fear is the #1 killer of successful sales careers. Fear of anything… Fear of rejection, fear of failure, fear of the unknown, even fear of success. Each of these can be overcome by a desire or need that is stronger than fear. That is up to you to decide what that is, but if you do, there is a lot of money to be made in this market.