FHA and Investor Specialist

Q: How do I apply for a VA guaranteed loan?

A: You can apply for a VA loan with any mortgage lender that participates in the VA home loan program. At some point, you will need to get a Certificate of Eligibility from VA to prove to the lender that you are eligible for a VA loan.

Q: How do I get a Certificate of Eligibility?

A: Complete a VA Form 26-1880, Request for a Certificate of Eligibility: You can apply for a Certificate of Eligibility by submitting a completed VA Form 26-1880, Request For A Certificate of Eligibility For Home Loan Benefits, to the Winston-Salem Eligibility Center, along with proof of military service. In some cases it may be possible for VA to establish eligibility without your proof of service. However, to avoid any possible delays, it's best to provide such evidence.

Q: Can my lender get my Certificate of Eligibility for me?

A: Yes, it's called Web LGY. Most lenders have access to the Web LGY system. This Internet based application can establish eligibility and issue an online Certificate of Eligibility in a matter of seconds. Not all cases can be processed through Web LGY - only those for which VA has sufficient data in our records. However, veterans are encouraged to ask their lenders about this method of obtaining a certificate.

Q: What is acceptable proof of military service?

A: If you are still serving on regular active duty, you must include an original statement of service signed by, or by direction of, the adjutant, personnel officer, or commander of your unit or higher headquarters which identifies you and your social security number, and provides your date of entry on your current active duty period and the duration of any time lost.

If you were discharged from regular active duty after January 1, 1950, a copy of DD Form 214, Certificate of Release or Discharge From Active Duty should be included with your VA Form 26-1880. If you were discharged after October 1, 1979, DD Form 214 copy 4 should be included. A PHOTOCOPY OF DD214 WILL SUFFICE.....DO NOT SUBMIT AN ORIGINAL DOCUMENT.

If you are still serving on regular active duty, you must include an original statement of service signed by, or by direction of, the adjutant, personnel officer, or commander of your unit or higher headquarters which shows your date of entry on your current active duty period and the duration of any time lost.

If you were discharged from the Selected Reserves or the National Guard, you must include copies of adequate documentation of at least 6 years of honorable service. If you were discharged from the Army or Air Force National Guard, you may submit NGB Form 22, Report of Separation and Record of Service, or NGB Form 23, Retirement Points Accounting, or it's equivalent. If you were discharged from the Selected Reserve, you may submit a copy of your latest annual points statement and evidence of honorable service. Unfortunately, there is no single form used by the Reserves or National Guard similar to the DD Form 214. It is your responsibility to furnish adequate documentation of at least 6 years of honorable service.

If you are still serving in the Selected Reserves or the National Guard, you must include an original statement of service signed by, or by the direction of, the adjutant, personnel officer, or commander of your unit or higher headquarters showing the length of time that you have been a member of the Selected Reserves. Again, at least 6 years of honorable service must be documented.

Q: How can I obtain proof of military service?

A: Standard Form 180, Request Pertaining to Military Records, is used to apply for proof of military service regardless of whether you served on regular active duty or in the selected reserves. This request form is NOT processed by VA. Rather, Standard Form 180 is completed and mailed to the appropriate custodian of military service records. Instructions are provided on the reverse of the form to assist in determining the correct forwarding address.

Q: I have already obtained one VA loan. Can I get another one?

A: Yes, your eligibility is reusable depending on the circumstances. Normally, if you have paid off your prior VA loan and disposed of the property, you can have your used eligibility restored for additional use. Also, on a one-time only basis, you may have your eligibility restored if your prior VA loan has been paid in full but you still own the property. In either case, to obtain restoration of eligibility, the veteran must send a completed VA Form 26-1880 to our Winston-Salem Eligibility Center. To prevent delays in processing, it is also advisable to include evidence that the prior loan has been paid in full and, if applicable, the property disposed of. This evidence can be in the form of a paid-in-full statement from the former lender, or a copy of the HUD-1 settlement statement completed in connection with a sale of the property or refinance of the prior loan.

Q: I sold the property I obtained with my prior VA loan on an assumption. Can I get my eligibility restored to use for a new loan?

A: In this case the veteran's eligibility can be restored only if the qualified assumer is also an eligible veteran who is willing to substitute his or her available eligibility for that of the original veteran. Otherwise, the original veteran cannot have eligibility restored until the assumer has paid off the VA loan.

Q: My prior VA loan was assumed, the assumer defaulted on the loan, and VA paid a claim to the lender. VA said it wasn't my fault and waived the debt. Now I need a new VA loan but I am told that my used eligibility can not be restored. Why?

Or,

Q: My prior loan was foreclosed on, or I gave a deed in lieu of foreclosure, or the VA paid a compromise (partial) claim. Although I was released from liability on the loan and/or the debt was waived, I am told that I cannot have my used eligibility restored. Why?

A: In either case, although the veteran's debt was waived by VA, the Government still suffered a loss on the loan. The law does not permit the used portion of the veteran's eligibility to be restored until the loss has been repaid in full.

Q: Only a portion of my eligibility is available at this time because my prior loan has not been paid in full even though I don't own the property anymore. Can I still obtain a VA guaranteed home loan?

A: Yes, depending on the circumstances. If a veteran has already used a portion of his or her eligibility and the used portion cannot yet be restored, any partial remaining eligibility would be available for use. The veteran would have to discuss with a lender whether the remaining balance would be sufficient for the loan amount sought and whether any down payment would be required.

Q: Is the surviving spouse of a deceased veteran eligible for the home loan benefit?

A: The unmarried surviving spouse of a veteran who died on active duty or as the result of a service-connected disability is eligible for the home loan benefit. If you wish to make application for the home loan benefit as a surviving spouse, contact our Winston-Salem Eligibility Center. In addition, a surviving spouse who obtained a VA home loan with the veteran prior to his or her death (regardless of the cause of death), may obtain a VA guaranteed interest rate reduction refinance loan. For more information, contact our Winston-Salem Eligibility Center.

[NOTE: Also, a surviving spouse who remarries on or after attaining age 57, and on or after December 16, 2003, may be eligible for the home loan benefit. However, a surviving spouse who remarried before December 16, 2003, and on or after attaining age 57, must apply no later than December 15, 2004, to establish home loan eligibility. VA must deny applications from surviving spouses who remarried before December 16, 2003 that are received after December 15, 2004.]

Q: Are the children of a living or deceased veteran eligible for the home loan benefit?

A: No, the children of an eligible veteran are not eligible for the home loan benefit.

for more information on VA Mortgage & Home Loans call the VA Mortgage Experts at (253) 472-1500 Locally based in the Northwest serving homeowners since 1986  - Kevin Tinsley - All Tech Mortgage Inc. http://www.alltechmortgage.com

Kevin Tinsley
All Tech Mortgage.com

Tacoma's #1 Mortgage Expert - Since 1996
FHA | VA | Conventional Purchase & Refinance Home Loans
7403 Lakewood Dr W, STE 2
Lakewood, WA 98499

(253) 472-1500 Office
(800) 339-7059 Toll Free
(866) 421-1788 Fax
kevin@alltechmortgage.com
www.alltechmortgage.com

Top things to know:

1. Don't buy if you can't stay put.

If you can't commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner - even in a rising market. When prices are falling, it's an even worse proposition.

2. Start by shoring up your credit.

Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.

3. Aim for a home you can really afford.

The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. But you'll do better to use one of many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford.

4. If you can't put down the usual 20 percent, you may still qualify for a loan.

There are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a down payment as small as 3 percent of the purchase price.

5. Buy in a district with good schools.

In most areas, this advice applies even if you don't have school-age children. Reason: When it comes time to sell, you'll learn that strong school districts are a top priority for many home buyers, thus helping to boost property values.

6. Get professional help.

Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Look for an exclusive buyer agent, if possible, who will have your interests at heart and can help you with strategies during the bidding process.

7. Choose carefully between points and rate.

When picking a mortgage, you usually have the option of paying additional points -- a portion of the interest that you pay at closing -- in exchange for a lower interest rate. If you stay in the house for a long time -- say three to five years or more -- it's usually a better deal to take the points. The lower interest rate will save you more in the long run.

8. Before house hunting, get pre-approved.

Getting pre-approved will you save yourself the grief of looking at houses you can't afford and put you in a better position to make a serious offer when you do find the right house. Not to be confused with pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history.

9. Do your homework before bidding.

Your opening bid should be based on the sales trend of similar homes in the neighborhood. So before making it, consider sales of similar homes in the last three months. If homes have recently sold at 5 percent less than the asking price, you should make a bid that's about eight to 10 percent lower than what the seller is asking.

10. Hire a home inspector.

Sure, your lender will require a home appraisal anyway. But that's just the bank's way of determining whether the house is worth the price you've agreed to pay. Separately, you should hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying. His or her job will be to point out potential problems that could require costly repairs down the road.

Source: http://money.cnn.com/magazines/moneymag/money101/lesson8/index5.htm

Private and Hard Rehab Money 101: What You Must Know About Rehab Financing for Investors

First, we need to clarify what investor rehabilitation really is. What we are talking about is financing for an investment property that needs rehabilitation (a rehab, a foreclosure, a handyman special, a renovation project, a fixer-upper, a condemned home, etc.). We will review how an investor client can purchase and rehab a property using various financing methods.

Why is it in your best interest to know this? First, you can make a lot of money investing in real estate but you must have the ability to finance your real estate investments. Most millionaires have either made their money investing in real estate or they have a substantial portion of their portfolio in real estate. Since residential real estate is the easiest and safest real estate vehicle to invest in, both real estate professionals and novice investors should have full knowledge of the topic. There are many real estate agents who are also successful investors, some of which become full time investors and part time agents once they discover the earning potential. Second, this information will help you when working with investors or would be investors. If you can help yourself and/or your clients finance more investment properties than you make more money.

Before we discuss the different ways to finance investment properties and the pros/cons of each method, we will need to review some of the factors to consider when investing in rehab properties. More often than not, there will be competition when making an offer. Often times, the sellers will be banks looking to sell off their portfolio of foreclosures in order to rid their balance sheets of non-performing assets. Sellers not only want the highest offer to maximize their profit, the seller wants to be certain the buyers financing is solid. We all know that a pre-approval letter isn’t always worth the paper it is written on. However, when the buyer knows their financing is solid they can be bold enough to make their earnest money deposit non-refundable. This alone shows the seller that you or your client you are a professional buyer and that your offer is real (this is the best pre-approval I know of). Often times, this is the difference in a competitive offer scenario.

Let’s now turn to the many ways to finance rehabs. This financing should include funds for acquisition of the property, renovation costs, and closing costs. Some of these methods will not surprise you but you will have clarity as to the best financing method upon conclusion.

1. CASH: Cash is king but only if you have it. It’s that simple. Cash helps on offers because you do not need a pre-approval letter, however, you should be prepared to provide proof of funds. The negative side of using cash is that you are tying up your personal assets until the property is sold or refinanced.
2. LINE of CREDIT: If you already own real estate with substantial equity than this is the next best thing to cash. Be prepared to show proof of your line of credit when requested by seller.
3. A PARTNER: You may have a partner who has cash - other people’s money (OPM) at it’s finest. The down side is that you have to split the profits and probably do most of the work. This has the potential of a marriage a 50/50 chance for divorce. In addition, you do not have the security of knowing the funds will be available since the funds are not yours. Partners often times will get cold feet prior to closing and back out of the loan.
4. BANK FINANCING: Yes, there are loans available from banks for purchase rehab money only. Usually, these are local banks and it’s always good to have a relationship with a local banker especially as you move on to bigger and better projects. In order to qualify for this type of financing, you must have a good credit history, a good debt-to income ratio, and good tax returns for two years. The downside is that they will require tons of paperwork, the process will be long and drawn out, and lastly you will have to come up with at least 20% of the purchase and 100% of the renovation costs plus all of the closing costs. Not bad if you have money lying around, you are patient, like paperwork, and don’t mind making monthly payments on a vacant house. Like any real estate financing, the lender will limit you to a loan to value (LTV) but in this case it will be calculated off of the after repaired value (ARV) (LTV’s are rehab loans are usually 70-80% of the ARV). The will usually have a six month term on this type of loan which would also be the case in the following types of loans as well. Six months is plenty of time to renovate and sell or refinance the loan.
5. HARD MONEY: You can borrow 100% of your purchase, renovation and closing costs. These are great loans because they are “NO MONEY DOWN” loans. One of the best ways to use OPM. The downsides are that these local deep pockets individuals who will loan you this money are expensive!!! Expect to pay no less than 10 points (a 10% fee added to the loan principal) and no less than 15% interest. Not bad if you consider that it is a cost of doing business and in most cases this is not a concern because you found a motivated seller and you will still have some great equity left in the property. As with Banks there will be an LTV usually 65-75% of the subject to value. The real downside to this type of loan is the monthly payments that will be required. These payments can be pretty steep especially when you consider that the property is vacant and no one is paying rent while you are renovating and marketing to sell or in the process of refinance. These lenders will give you between three to six month loan term. They charge high fees (typically an additional 5 points) for loan term extension. They are however more lenient than the local bank regarding paperwork and sometimes on the credit score minimum.
6. NOT SO HARD MONEY (ex: EDC): The number of lenders in the business of hard money lending has grown with the increased interest in real estate investing during the recent boom. During that time a handful of lenders of developed what I call Not So Hard Money loan programs. These lenders have developed loan programs that are much more investor friendly. They have taken the best features of bank loans and combined that with the best features of hard money loans. Additionally they provide additional services that make them far superior to these financing sources. They are as easy to work with as a hard money lender regarding paperwork and qualifications and have the more reasonable rates of a local bank. In additional to these benefits these lenders often provide consulting services as part of the loan program at no additional cost. These services provide a template for success. A new investor can get started without fear of failure and an experienced investor will have gain the knowledge needed to expand their business. EDC is a not so hard money lender I have used many times. Their website is www.equitydevelopmentpartners.com.

An investor myself I use my cash, my line of credit, and a not so hard money lenders. I will do partner deals but only if my cash and line of credit are tied up in deals and only if the deal does not work within a not so hard money lender’s LTV requirements. As far as using the bank I have found that you have to move fast and the banks are just too slow. The local banks can be a good source for a line of credit or a blanket line of credit once you established a portfolio and again have built up substantial equity. As far as traditional hard money lenders, I think it is a matter of time before their borrowers demand a not so hard money loan product instead.

EDC services several markets from the East Coast to the Midwest. You can view a map of our coverage areas and get to know your EDC Territory Director by clicking here.

To apply for a loan with EDC today, please complete our easy, online loan application.

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Currently: Texas Florida Alabama Missouri Kansas Kentucky South Carolina North Carolina Pennsylvania Maryland Virginia Coming Soon in 2009: Oklahoma Nebraska Colorado Mississippi Arkansas Iowa Tennessee

 

TVM Funding Group represents many private equity firms, lenders, and investors nationwide.

We welcome any commercial or residential loan scenario nationwide.

www.TVMFunding.com
Niche Private Money Commercial and Residential Lending
& Hard Money and Rehab Loans for Real Estate Investors

About the author: Mr. Michael E. Brown is a local Hampton Roads resident and has been an active real estate investor in Hampton Roads for nearly six years and working with real estate investors for ten years. He holds a bachelor’s degree in industrial engineering and has over ten year experience as a mortgage professional. He is currently the vice president of a national mortgage company heading their reverse mortgage dept. and has owned his own mortgage brokerage firm. Mr. Brown currently owns and operates a local real estate investment firm and has built a net worth of over one million dollars in less than five years using not so hard money. He is a member of the No Work Group (NWG), a private organization of real investors as well as a member of Tidewater Real Estate Investors Group (TRIG).

    

     Many times I am asked by young or first-time buyers what my #1 piece of advice for home buying is.  They are surprised to hear my response to that question, because I say something that they probably don't hear from many lenders  ...

     Don't Buy a Home!

     What??????  Blasphemy!

    

     Once I have their attention, I clarify my statement ...

     I tell them ... Don't Buy a Home ...

• Just because a tax credit is presently being offered!
• Just because a tax credit runs out soon!

• The timing is not good for you to do so either monetarily, emotionally, or for any other reason
• If you're not prepared to be a GOOD homeowner and perform the tasks needed for upkeep
• If you're not prepared to make sacrifices
• If you can't budget your money and live within your means
• Just because you think prices are going to go up on homes soon
• You do not understand the buying and lending process
• You don't care to learn the buying and lending process. 
• You will not devote the time to learn the home buying process
• Without proper professional representation, assistance, and guidance
• Your eyes and desires are bigger than your present wallet
• You have to deny yourself every other life's pleasure to buy a home

    

    

      Why do I say this?  Because buying a home is work.  It comes with responsibilities.  It can cause stress.  It costs money, time, effort.  

     I also tell them that home payments are an obligation you are promising to make.  Those obligations and responsiblities should not be taken lightly.  You need to enter the world of home ownership with your eyes wide open, fully educated, and prepared.  To be otherwise for any other reason can mean financial disaster ...

 

     I tell them to pass on the current temptations to buy ... unless you have educated yourself thoroughly about the home buying process and the obligations and responsibilities that come with being a home owner. 

    

     If ... after you have thoroughly educated and prepared yourself .... you still wish to proceed ... I urge you to then move foward and buy ...

    For if you are fully prepared and know what to expect of the experience ... you will enjoy the home buying journey and be glad that you made the effort.  

     That's my advice. 

     There is nothing better than owning your own home ... IF IT'S THE RIGHT TIME FOR YOU TO DO SO!  Otherwise ... wait. 

                            

www.genemundt.com

gene@chicagobancorp.com

Reverse Mortgage For Primary Home Purchase

Some senior home owners (age 62+) and most of their real estate agents know that Reverse Mortgages can be used to fund retirement expenses of any kind without the obligation of monthly payments that would be required with normal mortgage loans. The typical transaction is refinancing the current primary residence.

The new twist is to use a Reverse Mortgage to purchase another residence. Many mortgage lenders are now offering this option that will assist many seniors in their retirement years or times of reduced income. The new purchase must be for a primary residence. The current residence may be sold or kept as a rental property. The equity required when using a Reverse Mortgage for a home purchase can not be from borrowed funds or a gift. Most of the time, the needed equity would come from the profit on the sale of the previous home or the disposition of other assets.

If a Reverse Mortgage is used to purchase a newly constructed property, an occupancy permit will be required within 60 days. Counseling, which may be by phone, is an underwriting requirement and the fee is usually in the range of $125.  Some lenders require a deposit in the range of $350 at the time of application to cover the cost of the required appraisal. Since most of the borrowers will be totally new to this process, it is important to have a good relationship and line of communications with the loan officer. The full amount of the reverse for purchase proceeds must apply to the transaction. There are more options for the use of the funds when a Reverse Mortgage is used for the refinancing of the current residence.

This is a new program, so the lenders are learning the process along with the borrowers. It is important to restate that borrowed funds may not be used for the equity requirement. For example, if the borrowers wanted to use a home equity line of credit on the present home that will be rented or sold at a later date, the FHA requirements do not allow that financing to meet the equity requirement.

Prospective borrowers need to know that there are NO INCOME and NO CREDIT SCORE requirements for the Reverse Mortgage programs. The determining factors are the minimum age of 62, the appraised value of the home and the interest rate quoted by the lender. Many seniors simply will not qualify for normal refinancing programs or purchases using regular mortgage loans which have strict underwriting requirements relating to credit and income.

We represent home buyers and sellers as their exclusive agents in the Maryland suburbs of Washington DC and nearby counties. Full REO service for asset managers.

Your Real Estate Professional In Maryland,

Roy Kelley

Roy Kelley & Associates
Associate Broker, RE/MAX Realty Group
6 Montgomery Village Ave., Suite 200
Gaithersburg, MD 20879 
 
Client Assistance:  301-670-8996

Direct: 301-921-4569 
Fax: 301-921-4586  Main Office:  301-258-7757 x 569
Email: roykelley@mris.com  Home Search Website: www.roykelley.com 

Follow me on Twitter:  http://twitter.com/roykelley  

Recipient of the RE/MAX International Lifetime Achievement Award - 2008

If you’re a FHA buyer shopping for a condo, you’d better pre-qualify your lender first. If you’re listing a condo and a buyer gives you a FHA pre-approval letter, you’d better pre-approve that lender first. Because Spot Approvals are a thing of the past, it’s important to know which of the two remaining FHA condo approval processes your lender will be using: Direct Endorsement Lender Review and Approval Process (DELRAP) or HUD Review and Approval Process (HRAP) as outlined in MORTGAGEE LETTER 2009-46 B.

DELRAP is only available to lenders who have unconditional Direct Endorsement authority and staff with knowledge and expertise in reviewing and approving condominium projects. They also have the option to use the HRAP method if they prefer (usually if they’re not sure on the project or feel “iffy” about it). HRAP is the method all lenders will use who fit into one of the 3 following distinct categories:

 

• Lenders who don’t have unconditional Direct Endorsement authority from HUD
• Lenders who lack staff with knowledge and expertise in reviewing and approving condominium projects
• Lender who despite being adequately staffed and having Direct Endorsement authority are too cowardly to exercise original thought in underwriting, follow the guidelines and sign off on projects – thereby assuming some risk (this may sound funny but expect this to include many lenders)

 

Since evaluating the eligibility of an association is the same between DELRAP and HRAP, the only difference between the two is who does it, or more importantly, how long it takes. It takes a considerably longer amount of time to get the approval under HRAP. This extra time has implications for finance contingencies, rate locks, expiration of tax credits and much more.

One could try affirming that their condo association is approved in the FHA-approved condominium projects website but good luck with that! It would be wiser to make sure that your lender uses the DELRAP method of approving associations. Additionally, if your lender uses DELRAP but decides to use HRAP on your particular association, it would behoove a Realtor and buyer to look into why this decision has been made as it may indicate some level of ill-health in the association that a buyer might want to know about.

It’s one thing to be aware of a guideline change or that one is happening. It’s another thing to read between the lines, understand the potential consequences and steer clear of potential problems. Let’s get ahead of this one!

 

According to various polls, from local associations to the widely distributed Harris variety, public/consumer perception of the greater real estate industry and the agents that serve it is in the toilet.  This is nothing new.

In the spirit of taking action to reverse the negative stigma around the industry, there has been a spike in conversation recently around the cause of ‘Raising The Bar’ (#RTB) by real estate professionals, including an REBarcamp session before Inman Connect NYC, Twitter-speak, blog posts, podcasts and blog talk radio shows.

With lots of conversation comes lots of ideas, including:

• Raise the barrier to entry (Keep out the stupid, poor agents)
• Kill the barrier to entry (Increase competition)
• Increase continuing education requirements and ethics standards (Create smarter, more ethical agents)
• Only hire honest, empathetic, generally good people who have a strong work ethic (Make the consumer LIKE me into doing business)
• Acquire pretty technologies and engage in Social Media best practices (Apply the Laws of Attraction)

All of these ideas focus on the top of the industry funnel – marketing, messaging, advertising, massaging, allure, the ‘easy to manipulate’ aspect of reputation management…they are too far removed from solving the real issues at hand.

The common thread I’ve heard is that the industry must increase its ‘Professionalism.”

My Notorious partner posed ‘The Single Question to Rule Them All‘, all Lord of The Rings style:

“Is professionalism a competitive advantage in real estate or not?”

In short, Rob says if this is the case, the riff-raff will eventually be driven out.  If it isn’t the whole RTB exercise is anti-competitive in nature and generally deceptive.

Robs logic is sound, but there is very little context to the question, so it’s just that…logically correct with alot of ambiguous conjecture and talking heads spewing esoteric, self-serving opinion around the definition of professionalism and how to raise That.

Rewind— REBarCamp San Francisco 2009.  Sitting in a group of well respected real estate ‘thinkers’, Rob Hahn asks:  ’What is the next big thing in real estate?’  With my head focused on the cornucopia of tech related products and services, I didn’t have an answer and admitted to such.

Today–- My answer is pulling the veil back around performance related metrics relative to market baselines for practicing real estate agents.  Establish a Bar, establish accountability, demand greater transparency and Raise The Bar along the way.

So, I propose ‘The Single Question To Rule Them All’ then becomes:

‘Is Performance a competitive advantage in real estate or not?’

Rob’s logic applies to this question and fits like a rubber glove.

If Performance is a competitive advantage, the riff-raff will eventually be driven out.  If its not, then the whole RTB exercise is anti-competitive in nature and generally deceptive.

Performance is a competitive advantage.  I trust I don’t have to write 400 words to explain why.

I’m not sure that the greater industry is ready to RTB…it can be done in pretty straight forward fashion but there are substantial ramifications.

Lets begin…

Social Media Can Help Raise The Bar.

Generally speaking, Social Media provides a two-way conversation medium that ideally compels some level of engagement between two parties.  There is an emotional connection that Social Media taps into for people and it works (very well) when implemented thoughtfully and engaged consistently…a good strategy herewill drive potential clients.

Social Media should not be postured as a chronic popularity contest where thou with the most ‘friends’ wins.  The term friend has a diminished meaning in the world of  5000 Twitter and FaceBook ‘followers’. Being named to ‘influential’ lists and the such amounts to little more than superficial ‘pat on the back’ contests amongst inter-industry professionals and is of little value to a consumer…I digress.

Where Social Media really stands to help RTB is rooted in the caveat of the medium:   If you don’t follow up your dynamic online persona with performance driven results, consumers are likely to wield Social Media against you…As stated, its a two way street and bad news travels fast.

Set The Bar With Transparent Access to Relative Performance Metrics.

Open the MLS data vaults to establish a baseline (or bar) around local market performance metrics such as:

• What is the average Days on Market for a $Xk to $Xk house in my market?
• What is the average List to Sales Price difference for similar homes in my market?
• How many sides did an average agent close in the last 6 mos, 12 mos, 24 mos?
• What is the average # times a listing re-priced or re-listed in a given market?
• What is the average final Sales to List price ratio?
• What is the average commission charged on a property within my search criteria?
• How do REO’s and Foreclosures affect a property in a given area?

Once I have a flavor for how my market is performing on average and a Bar has been set, the second and more important question is:

Which Agents/Offices/Brokerages/Franchises Outperform These Averages and by How Much?

You can’t argue with real, empirical data.  You can’t fake the grades on your bell curved report card.

Allowing consumers to evaluate which real estate professionals outperform local averages (Baselines or Bars) that are important to the specific consumer would go a long way toward increasing the likelihood of a positive experience, as well as aid in improving consumer perceptions and expectations.

In addition, consumer access to performance based information (currently locked under MLS data use Rules and Regulations) would:

• Drive out the under-performers or force them to do what it takes to raise themselves above the Bar
• Spur innovation in the sector of commission reform <–A big deal to consumers
• Increase good competition

I can hear the arguments:

‘Just because Sally transacted more sides, doesn’t mean she’s a better agent.’    Very true.  Johnny could have sold 4 properties to Sally’s 20 over the past 12 months, but Johnny sold each one in far less time than the market average.

‘Billy took, on average, 30 more days to sell a property.’  Yes, but he did so at a List to Sales price that was well above market averages.

‘My consumer wouldn’t listen to me and insisted I list the price way above market value, thats why I had to reduce the price 3x and it sat on the market for 462 days.’   Well, you should have passed on taking that consumer as a client.

There are many such what if scenarios.  Performance based data isn’t of much value when analyzed in a vacuum.  It becomes very valuable when compared and contrasted against market averages and considered in conjunction with a unique consumers wants and needs.  Throw in consumer ratings, other forms of feedback on some level and now you’re serving steak instead of sizzle.

Evolve The Traditional Real Estate Commission Model

I know, its not supposed to exist, ‘there is no set commission model’- humor me.

The fundamental issue in the ongoing consumer vs. real estate professional beef is the gross misalignment of performance for consideration.  Consumers generally have a negative opinion of real estate professionals because they believe they overpaid for services compared to the value received.  This is likely because the agent they ended up retaining had poor performance metrics or their positive metrics didn’t align with the consumers wants/needs.

Access to such transparent performance metrics relative to a baseline would blow a hole in the bow of the traditional real estate commission model. Underperforming, inexperienced agents could no longer ride the coat tails of top performing seasoned agents.  Top performing agents could set new pricing models, justify a retainer for services, charge for services using a ‘cost plus’ model…they could make MORE money instead of subsidizing Ron the part time Realtor who botched his last three listings, yet scored a listing that would have otherwise been yours because his college friend Bill said something about needing a real estate professional on FaceBook.

I can’t think of another industry that pays entry level employees on the same scale as long standing executives.  Consumer confidence and perception could rise substantially if they knew who they were paying for up front rather than after the transaction closed, didn’t or worse.

If you’ve followed along to this point I’m sure many are screaming that something like this will never happen, because…:

MLS’s are funded by and thus beholden to the agents they serve.

If an MLS decided to adopt some crazy cavalier attitude and turn this performance based data consumer facing, many agents would likely get upset…read: violent rebellion amongst natives, loss of revenue, mass firings at Cowboy MLS.

Since MLS’s are generally for profit enterprises and the people that run them probably like the fact they have a job, this type of a mass public outing is a non-starter.

So, what about a version that displays all the pertinent individual performance metrics and how they rank against the given baseline/bar, but leaves the agents personal information anonymous?  The only time an agents personal information becomes available is when a consumer pays for the privilege.  Unlimited access to all agent profiles wouldn’t be prudent for obvious reasons…rather a set amount, say 5 profiles per subscription. Those below The Bar remain anonymous and left to think about how to raise their Bar.

In the alternative, Stan finds a real estate professional on Facebook, Blogsite, Zilow, Trulia, IDX, ActiveRain…pick your Social Media outlet.  They like the personality and now want to check how deep the beauty runs.  Dial up the agents performance related data and get a holistic view of who you might retain to handle the largest transaction of your life.  Think Carfax for real estate professionals.

Shame on the agent or broker that would threaten to pull out of an MLS for offering this anonymous data for public consumption, that would be like saying you want the industry to remain in the gallows of consumer perception, deceptive beasts of no prestige.  And if shame isn’t enough, I’m sure there are other incentives to keep everyone submitting their data…

In the ugly and very likely circumstance that agents and/or brokers still balk at the idea, make it opt-in only.  No personal information available unless you as an agent give the MLS the express right to do so.  Pay agents to opt-in, every time their personal profile is requested.  Share the wealth a little.

The big question is always:  Where is the money?  I’d be willing to bet that (ALOT of) consumers would pay for access to such information presented in an intuitive UI-sortable and searchable by what metrics are important to their situation (much like Diverse Solutions did).

This isn’t some pipe dream that would take millions of dollars in development or years to implement.  It could be done quickly and at relatively little expense.  In fact, the primary reason this data isn’t already available is due to simple economics and complex politics…there is alot of money in keeping the data under lock and key…economics rules politics, so where there’s a bigger dollar there is a way.

There are Agent ranking systems out there.  Most allow the agent control over what information is displayed and/or claimed…rendering the system and information skewed at best.  This type of agent rating system must have a very complete set of market data and be maintained by 3rd party providers that simply maintain its purity and integrity.

Diverse Solutions has created the closest product I’ve seen to a tangible, working model using MLS direct data.  Agent Scouting Report was the result of a 48-hour developer competition at the Inman Connect conference in San Francisco last summer.  In its current edition Agent Scouting Report doesn’t work because it shows every agents stats…effectively ostracizing those that happen to fall below the Bar.  I don’t think they’re far off, their product was well thought out given the limited time they had to develop it..a few turns of the dial and some thoughtful considerations in how the data is displayed (see above), and..?

As an agent or broker would you be adverse to this?  Why?  :)

The Broker/Franchise Perspective.

I own a brokerage or franchise and want to fill my office with agents who exceed certain performance metrics for certain property types in certain areas of town.  My brokerage is conducive for these types of agents to excel.  As a broker/owner, I would pay to know who these agents are.  This would be an immensely valuable tool in analyzing my own brokerage as well as my competition on key performance indicators.  I could derive all sorts of actionable data to use as a recruitment and retention tool.

So is everyone ready to Raise The Bar?

It depends on if those who talk the talk about Raising The Bar are indeed serious about doing so and walk the talk.  It will take open minded professionals from MLS directors, their boards as well as the brokers and agents they serve.  I’ve laid out some top level ideas on how economics could cut through the politics, there are more.

The upside for the industry is huge from customer service, commission model and perception standpoints.  It risks shaking the long standing economic model right down to its core, which is a good thing.  In the right hands this very well could and should be the next big thing in real estate.