Lots of people, including me, are scratching their heads; what is going on in the real estate market? Recently I asked more than a dozen people as to their assessment of the current market. These were licensees, lenders, title reps and 2 home warranty reps. Here are their answers.

            “Worst market I have seen in my 23 years”

            “Feels like we are heading for a crash”

            “While it is a tougher market, there is plenty of business to be had”

            “The market has forced me to change my approach, and that has helped”

And a few comments like the above.

So, where are we? Failing? Steady? Or improving?

Remember the saying “one person’s garbage is the next person’s gold”!

All external metrics should point to a better market. But the market is resisting improvement and is settling for a steady market that has signs that are difficult to interpret.

It is mostly a matter of perspective and willingness to embrace and/or make changes.

What worked a few years ago might not work now. Tools that are rapidly changing can have either a wildly positive impact on your business or be a disrupter and keep your attention on the downside.

This author has been in real estate for 43 years, since early 1981. In the early 1980’s, interest rates hovered around 13%-15% for a 30-year mortgage. One would have expected the market to crash as a result, yet it did not. Yes, it retracted for a period, around 4-5 years, until rates fell below 10%.

But we sold a lot of homes during that time, just by recognizing what impact that had, and adjusting our marketing, our interactions with clients, and our promotion of the market. While many agents failed and found other employment, those that stuck around, made some changes, and changed their attitude a bit, had many sales and made good money.

Some of the tools we have now used for 10-15 years might be the albatross around our necks. Technology, advertising, and interactions with different cultures and people are very different today compared to what it looked like even 7 or 8 years ago.

Every market creates challenges. Surviving and thriving in a changing market is not as hard as it seems.

In the early 1980’s, as stated earlier, interests rates were in the mid-teens, but we overcame that challenge.

In the late 1980’s, the market shifted when the S&Ls (Savings & Loans) crashed and fell like dominoes. We all had to deal with the RTC (Resolution Trust Corporation) that gathered all the real estate assets that the failed banks loaned on and had us list and sell them. True, many were commercial properties, but there were plenty of residential properties, as well.

Late 1980’s- early 1990’s, two more fair housing requirements were added, we changed our MLS and lockbox system, we had a new purchase contract, and we started to feel the impact of a lawsuit in Minnesota that had national impact, which changed how we disclose and deliver agency.

A few short years later, the need to disclose material matters resulted in the AAR SPDS and a sprouting industry; inspectors. That added a few extra steps to our process of listing and selling, so we had to adjust for that.

Soon after 9/11, the market retracted significantly, as all acting partners in the industry felt uncertain of the safety of our country and the resulting wars that commenced. Everyone took a step or two back, until the feeling of uncertainty faded.

But, a few years later, in 2008, in what seemed to be a matter of days, the stock market crashed, financial institutions that owned billions in mortgage-backed securities failed, plunging the world economy on the brink of collapse. Home values plummeted, 401k’s evaporated, and the housing crisis created challenges never seen before. And we survived.

As a result, the country fell into a recession, bordering on a 1929-type depression. We overcame that, dealing with defaults, short sales and rampant bankruptcies.

Industry-wide changes notwithstanding, external forces dictate our markets. Jobs reports, inflation, CPI changes, recessions, Fed rate changes, policy changes based on politics all have positive or negative impacts on our markets.

Most recently, March of 2020, when we all realized that a world-wide pandemic was upon us, every industry in the country (and world) suffered, with fellow citizens dying at the rate of tens of thousands a day, businesses closed, and again, we were in a recession.

Summary: The real estate market has always been on a roller coaster, up and down based on a myriad of challenges. Most of those forces we did not create, cause, or change. Change is part of the cycle. Spend enough time in the industry and you will experience this.

Yes, there are external forces, such as interest rates in the 7’s, debt ceiling uncertainty, election season approaching (or is it here already?), a Dow Industrial Average that is clearly on a roller coaster and waiting with bated breath for any Fed announcement.

HOWEVER, during all this and in any cycle, people need housing. That could be a rental, but even a rental today could turn into a sale next year. Shelter is a basic, essential human need, on the Maslow’s Hierarchy of Needs. As the human race increases in population, there will always be an increasing pool of clients in need of living space. And living spaces are rapidly changing, as we experience an affordable housing crisis.

Identify what worked a few years ago but seems not to be working now. Assess what you need to do to gather more clients, maybe going back to basics, or embracing a new technology that will improve your prospecting.

Bury your head and resist change, and you most assuredly will struggle.

Open your eyes and embrace change, and your business will soar.

On February 1, AAR published the new Fair Housing Advisory. Of course, with a new form, there are always questions. This author served on the AAR committee that developed the form and saw firsthand the reasons why this form should become a standard of care.  Some facts…

Sadly, REALTORS across the US have taken liberties to promote racism and hatred, on their personal social media and on other media tools, even at live events.

In 2019, Newsday A Long Island NY newspaper published the results of a 3-year, exhaustive, hidden camera expose of Realtors on Long Island showing the bold and repugnant discrimination.

As a result, the State of New York developed a Fair Housing Advisory that is REQUIRED on every real estate interaction with a potential new client. The Governor’s office, with the NY legislature, has created very strict penalties of any agent that does not utilize the form with their clients.

Then, in 2020, the NAR Professional Standards Committee developed a new Standard of Practice in Article 10 of the REALTOR Code of Ethics, SOP 10-5, which clearly says that a REALTOR shall not use hate speech, intimidating speech, slurs and epithets when referring to a protected class under the Federal Fair Housing Laws and the REALTOR Code of Ethics.

But the discrimination has continued across the country. As a result, in some cases, many state governments have created similar forms, while in other states, the state association of REALTORS created the form.

The AAR Risk Management Committee (this author serves on the committee) decided to create a statewide advisory. A workgroup was formed, and we reviewed forms from other states and associations, along with the guidance from HUD. The result was this Advisory, which we feel should significantly reduce discrimination in real estate. Why?

Why and how would it reduce discrimination? If every licensee in the state was obligated to have a frank conversation with every prospect about their rights in real estate, what would be considered discrimination, and where they may file a complaint if they feel they were a victim of discrimination. It should make licensees more mindful of their obligations, and possibly stop them from discriminating.

Here are a few Q&A’s

Where do I obtain the form? It is on Transaction Desk, (or if outside of Phoenix, most likely in your on-line forms programs. Also, AAR has it on their website for all members

Is usage of the form required by AAR or the state? As of this moment, no, it is not. However, many brokers state-wide have indicated that they will require it from each of their licensees, and this author and AAR applaud any broker that takes that position.

To whom should the form be presented? Any person(s) who are potential clients, such as buyers, sellers, landlords and tenants. Any property manager should present the form to their owners.

Our position as REALTORS and licensees should be to provide the best opportunity for everyone to begin and complete a transaction without ever feeling that they were a victim of discrimination. And to inform them that if they were a victim, they have recourse and resources as to how and where they could file a complaint.

Not yet. But at some point, they will be for a number of reasons. First, the US stopped manufacturing R-22 refrigerant Freon in January 2020, and imposed an “import ban”.  Knowing this ban was approaching for almost a decade, companies had begun stockpiling R-22 refrigerant. Thus, it is available and might be for another decade, but will start to face issues with availability.

Second, when the US adopted the “Montreal Protocol” American manufacturers began switching their manufacturing from R-22 units to R410-a, also known by the brand name Puron.

Here we are 11 years later, and there are tens of millions of properties that use a refrigerant of some sort. 

Why does this matter? 5 years ago, a pound of R-22 cost about $14. If your system lost all its refrigerant, and you needed 10 pounds, the cost was $140. Manageable.

Today, delivered and installed by a qualified AC tech, a pound of R-22 is close to $180 retail. That same unit needing 10 pounds, that could cost the seller (or the buyer who now owns) $1800. Big difference. 

As an agent, it is NOT your obligation to determine the age or refrigerant usage of your seller’s system. It is their obligation. But the older the system, there might be more disclosure obligations. Will every property inspector identify the age and the refrigerant of a system? No. Some will, but mostly that is up to the seller.

Let’s assume that your seller had a new system installed in the spring of 2017. Is that R-22, or R-410a?  Odds are it is the newer refrigerant. But not guaranteed.

Simply put, listing agents, it's a great idea to have a conversation with the seller about the system so that both you and the seller would make the proper disclosures.

Run this through your broker if you are not sure.

Certain markets over time create the question for the listing agent; I have 5 offers for my seller, and I wrote one of them. Is there a specific order in which I present them to my seller?

To answer that question, the answer is No, there is no specific order. Some of that could be addressed with the seller, asking the seller how she would like the offers presented, such as lowest to highest net, or vice versa, closing time sooner versus later, order in which received, and numerous other factors. It is best the listing agent provide the options to the seller and let the seller decide.

Another choice is the method of presentation; put all 5 on the table in front of them (assuming you got into your car and met with the seller in person) or once an order is selected, present one at a time. That should be the seller’s choice. Always be mindful of the seller’s reaction; read their body language. Some offers might really intrigue them, while, for whatever reason, some others totally bore and/or insult them. Be sure to be sensitive to their reaction; both verbal and non-verbal.

 Lastly, now the seller has reviewed all 5. What are their options?

1. Accept one and reject the other 4
2. Accept one and sit on the other 4
3. Accept one, and offer back-up to one of the others
4. Counter 1, and sit on 4
5. Counter 3, reject one and sit on the other one (you must use the multiple counter form when countering more than 1)
6. Counter all 5 of them (you must use the multiple counter form when countering more than 1)
7. Sit on all 5 waiting for a few more to be presented.

Needless to say, there are dozens of combinations including those above, meaning the seller has a great deal of flexibility. While in many cases, we are obligated to play by the rules, in most cases, sellers have no rules. One misconception is that the seller if obligated to sign the rejection part of the contract and return that to the buyer if they are in fact rejecting the offer. That is simply not true. As the listing agent, you should encourage and/or gently insist that they do that, yet they have no obligation to do so.

Give them the choice and proceed, with one caveat; Do not keep the buyer agents in the dark…Tell them exactly what is happening. This is professional courtesy. Remember, that buyer’s agent has a pesky buyer calling them 10 times a day, and all the agent is trying to do, is help you uphold your obligation to the seller, and put money in everyone’s pocket.

Possibly, although not yet. In most cases, the refusal of the seller to offer VA financing stems from the listing agent making possible false comments to the seller, or creating a cost fear for the seller, stating “…it will cost you more if the buyer uses their VA eligibility…” or say “it will require you to make certain repairs…”

While it is true that with VA loans, the seller might incur additional costs that are not required on FHA or Fannie Mae loans. And it is also true that the VA appraisal might require certain items fixed for the loan to be approved, versus a BINSR request which is negotiable.

Which in and of themselves, might cost the seller some money versus other financing that possibly would not.

BUT, this is a Veteran, a person who represents our country and probably put their life on the line to defend the country. They deserve every benefit we can offer.

Sometimes, the VA appraiser notes that the roof is deficient, or the stove has a bad burner, which could result in the seller being required to repair or replace. However, VA has an appeals process which often takes a day or two whereby the loan officer could appeal that request for the benefit of the veteran trying to buy the property. If the appeal is successful, that benefits all parties involved.

The problem is twofold. Many veteran groups rally the cause by stating that a seller’s refusal to allow VA financing should be a violation of Fair Housing rules and statutes. Right now, under both the Federal laws and the REALTOR Code of Ethics, Veterans are not a protected class, but the groundswell of energy is pushing that forward.

To this author, this could mostly be solved if Congress offered legislation to strip away all the overlays on VA loans, and make them look, feel, act and cost the same as FHA and FNMA loans. With purchase contracts in most states, any buyer could reject a home if the stove had a non-functional burner, or the house had a bad roof.

And if Congress acts and makes Veterans a protected class under the Federal law, and NAR added Veterans to our Code of Ethics, those will go a long way to provide the much-needed protection and caring of the people who deserve the respect and protection of all Americans.
If you agree, please contact our Senators

Mark Kelly  https://www.kelly.senate.gov/contact/contact-form/
(602) 671-7901

Kyrsten Sinema  https://www.sinema.senate.gov/contact-kyrsten
602-598-7327

While a good part of the country uses an Exclusive Buyer Agreement, the brokers and agents in Arizona have been very slow to embrace the use. Let me pose this issue.

How many times have you worked your heart out for a buyer, spending weeks, months or longer working for them, only to find that they bought a property on their own or through someone else. And often, they bought something that they swore they would not buy.

Many agents claim that a buyer going elsewhere is simply a part of the process, sort of like the need to kiss a lot of frogs before finding the prince (or princess). It does not need to be like that.

Think of a baseball player. There are many metrics to determine a superstar, such as the number of home runs, RBIs, on base percentage and plenty more. But the most common is batting average. If a ballplayer failed 7 out of 10 times at the plate, yet was successful only 3 out of ten times, they would be batting .300. A ball player that does that is coveted and offered huge salaries and perks. A superstar.

Most real estate agents have similar averages. If you closed 3 out of every 10 buyers, every month, you would be making a good living, closing 36 deals a year.

So I ask; if you could or actually close 3 deals a month, would you rather work with 10 buyers and close 3, or would you prefer to work with 4 buyers and close 3? Imagine all that free time, to work with more buyers, or play golf, travel, or spend more time with family.

I can hear the arguments already.

Most buyers won’t sign it. NOT TRUE.

Most buyers will walk away and work with a different agent. Good, send them away, as they are not serious. Let them waste someone else’s time. They might actually buy, but they want a tour guide and someone to buy them lunch.

You know this! How many buyers approach you and bristle when you talk about pre-qualification? They are not serious.

How many buyers ask you for a rebate or some concession, claiming that other agents are willing to do that?

If you have a license to make a living, then you owe it to yourself to consider this. To prove this, I also ask, what does it cost you to have someone waste your time? What are you worth? What did you earn the last full year you were active? If you worked all year, and determine how much you earned, divide that by the total number of hours you spent with buyers, showing, previewing, researching, negotiating and all the other activities.

If you earned $80,000 and worked a total of 200 hours over the year (this does not include peripheral times, such as classes, meeting with your broker, office team and all activities not connected with a buyer.

With those numbers, you earned $400 an hour. Some attorneys don’t earn that. When an agent in your office wants to chat about nothing for 30 minutes, that costs you $200. Think of all the people and conversations that cost you thousands of dollars.

Once you calculate what you are worth, you will be less likely to allow anyone waste your time, including buyers that are not qualified or not serious about buying.

Full circle; the way to do that is to have them sign a Buyer Broker Agreement. Ask 10 buyers to sign it, 2 or 3 might.

Those people will buy from you and close. The others, again, will waste someone else’s time.

Find an ABR class, typically one full day of training, or maybe over 2 days. And make sure your broker is on board.

Do this and you will make more money, have more free time to spend with your family and your hobbies, and you will have less stress and be more productive.

Most agents readily recognize that they are licensed with a broker and are unable to be licensed with two brokers at the same time. Thus, the agent works for one broker and only that one broker.

How or when would an agent work for two brokers at the same time? Simple. Mark works for broker Jennifer, and one day decides to leave Jennifer’s company. Mark approaches Jennifer and tells her that he decided to leave and go work for Richard. While disappointed, Jennifer agrees to review Mark’s activity to determine what needs to be done with any listings or contracts, property management agreements, etc. Mark has no listings, yet has two deals in escrow, one closing in 3 weeks and the other closing about 5 weeks later.

Jennifer should instruct Mark on what happens with those deals. Jennifer should tell him that she will either work the deals or assign the deals to another agent in the company, and Mark will be paid, when the deal closes, according to his IC Agreement and/or Commission Agreement. Jennifer should also warn Mark not to do anything involved in those two deals, since if he does, he would be working for two brokers at the same time. Working a deal still at Jennifer’s company, while licensed with Richard’s company violates several state statutes, specifically  ARS §32-2153.A.8

That being said, sadly, Jennifer often tells the agent the wrong instructions. Those might be “sorry you are leaving, but if you want to be paid, you need to work those deals to closing…” If Jennifer says that, Jennifer is telling the agent to violate state statute.

If you decide not to talk to Jennifer, go on-line to ADRE and sever your license from Jennifer, you would be required to check the box affirming that three items are true; 1. you will not work for more than one broker at any time 2. you will settle any business issues with Jennifer and return any corporate collateral material, and 3. You have settled any financial issues with Jennifer.

If you check that affirmation box, yet violate any of that, you are violating state statute. The penalty could be severe.

Often there is a conversation about transferring the deal from Jennifer to Richard. Jennifer might even suggest that, yet it is not commonly done. In most cases, Richard does not want the deal for many reasons, mostly that he did not approve the deal, the terms, the forms, nor supervised the agent on the deal. And if transferred, the buyer and seller must agree in writing that the deal is being transferred from Jennifer to Richard.

It is probably best just to leave it with Jennifer, let her work it or assign it, and then Jennifer pays everyone when it closes. Mark would be paid according to his agreements with Jennifer, and Jennifer is allowed to pay the commission directly to Mark, (per ADRE Substantive Policy 2005.08) and not through Richard. In most cases, Richard does not want the money since they have no file to attach it to.

Of course, you would not do that, for so many reasons. Image, safety, reliability and so much more.

But another part/tool of our business is often unnoticed yet could create as much havoc. Our technology. Our devices on which we conduct our business, communicate with clients, title company, lender, inspectors, prospects, other agents, etc. We often use old, out-of-date devices that are also not maintained properly.

Did your computer ever freeze on you? Go to the blank blue screen-of-death? Often, we tolerate technology issues as normal, yet do not desire to get to the root cause and fix whatever is causing the problem.

If the check-engine light on your car activates, do you ignore it, or at some point, check it out?

Why am I making mention of this? Well, first, productivity. I am not suggesting that you change your devices every year or so, but I am suggesting that you pay attention and maintain them, I don’t have the time or room here to go through everything now in a blog. But, computers, phones, printers, scanners and all your devices need some TLC, often. With the proper care and attention paid, they could last longer. But ignored, they can make your life miserable.

That said, you should ALWAYS do the following:

1. Keep your devices’ operating systems updated. Usually, they are pushed to you from the manufacturer or internet company, so be sure to accept and schedule their download and installation.
    
2. Keep virus programs up to date. No need for expensive, invasive programs.For example, if you have a Windows device, Windows Defender does a good job. And a good malware program.
    
3. Routinely clear your browsing history, at least weekly or more often. Failure to do so could slow down and clog your systems and could leave lethal links and malware in your device.

These are just for starters. If you own a car for 5 years, how often do you change the oil, check the brakes, rotate the tires, lube the joints, check tire pressure and do routine normal maintenance? Let’s hope you do, and not think about it while doing 70 MPH on the freeway. Routine care and maintenance will help the car last years. Do the same for all your devices.

As devices and their operating systems age, they become more susceptible to breakdown and more available for hackers to break into and steal information.