Some properties are being advertised as a short sale when they really aren't in an attempt to lure bargain-hunter buyers. A new book,Foreclosures, Short Sales, REOs, and Auctions: Tools for Success in Today’s Real Estate Market, published by Dearborn, provides guidelines for using the term correctly. Here's an exclusive excerpt:

There are a number of licensees who are attempting to attract buyers by using the term short sale in marketing property. It is very similar to the furniture stores that are constantly advertising that they are going out of business to draw purchasers. The fact that a home has lost value or that the loan has increased in amount and is now more than the value of the property does not automatically make the transaction a short sale.

It's important that a licensee conduct a thorough analysis, not only of the property value and loans but of the prospective seller’s financial condition as well. As was indicated, according to some licensees who are experts in the field, only a small percentage of short sales are approved by lenders.

What is to be gained by these licensees who advertise properties as short sales when they really aren’t? The answer is attracting more buyers, of course.

Some licensees are describing properties as preforeclosure listing or short sale and use the terms synonymously. Appropriately, a preforeclosure sale of property would involve one where the owner is in default. The property may or may not be worth less than the loan amount.

On the other hand there are owners who are not in default attempting to sell a property for less than the amount of the loan who appropriately call the transaction a short sale.

Is it a short sale if the lender has not approved a sale? How can a lender approve a transaction without having an offer from a buyer? What can be done about these situations? It may be as

simple as indicating a property is a possible short sale. Additionally, standards and rules can be developed to curb the abuses.

In May 2008 the NATIONAL ASSOCIATION OF REALTORS® approved new model rules that would allow a real estate practitioner to alert fellow licensees to potential short sales and notify them that it is possible the lender could require a reduction in the gross commission and that the cooperating broker would share in the reduction of the commission received. Each MLS may decide whether or not to require their participants to make a disclosure if it is reasonably likely there could be a short sale.

It is common in short sales for the lender who is considering discounting the loan amount to seek others who are willing to sacrifice as well, including the real estate broker who has the short sale listing.

The question becomes, when the listing broker chooses to reduce his or her commission, is he or she still obligated to pay a cooperating broker the commission published in the MLS? Too often, this issue is left unresolved and harsh feelings develop as a result.

While the model rules do not make it a requirement of submitting a listing to a multiple listing service, it would be considered good practice to place a conditional offer of compensation to cooperating brokers in the “Remarks” section of the property information sheet that clarifies what the agreement with the listing broker is going to be.

Such an agreement could be: “Both the sale of the property and the gross commission payable is subject to lender approval.”

What would put the cooperating broker on notice that his or her commission is truly subject to the lender’s discretion would be the additional agreement: “Any reduction in total compensation by the lender is to be split 50/50 between listing and selling agents.”

Of course the percentage amount of the split is totally at the discretion of the listing broker. The important thing is that the cooperating broker is put on notice up front and if the terms of the agreement are not satisfactory to them they may not show the property.

In the absence of such phraseology in the MLS a diligent agent will want to call the listing agent and clarify exactly what the agreement is before performing actions. No one is required to work for free. If a cooperating broker should choose to show a property whose commission is unclear at best, or is unhappy with any offered commission, he or she could insure the desired compensation by using a buyer’s broker agreement.

This textbook is currently used across the country in continuing education classes for real estate agents and mortgage bankers. Please note that this book can be purchased through RECampus for professional development purposes; however, it cannot be purchased through RECampus for continuing education credit. Visit the Dearborn Education site to purchase the book.

Posted on November 20 at 12:04 PM | Permanent Link | Add a Comment (5)

The National Association of Real Estate Editors announced three winners, along with a first-time author award, for top real estate books this year for the 2008 Robert Bruss Real Estate Book Awards. Check out the list of winners and then share with us the best real estate book you've read this year.

Gold Award
Prefabulous: The House of Your Dreams Delivered Fresh From the Factory (Taunton Press)
By Sheri Koones
Buy the Book

Judges comments: "It explores in depth the different types of prefab homes available on the market. The amount of information is stunning, making this book a necessity for anyone who is considering building this type of house.”

Silver Award
Creating Value: Smart Development and Green Design (Urban Land Insitute)
By Vernon Swaback
Buy the Book

Judges comments: "With interest in a 'green' environment rapidly receiving more and more attention, this book by a well-known architect is must reading for anyone interested in real estate development. Thoroughly researched and making good use of four-color photographs and

illustrations that allow the reader to see the points that the author is making, it breaks new ground in our understanding of creating value by design."

Bronze Award
Hines: A Legacy of Quality in the Built Environment (Fenwick Publishing)
By George Lancaster
Buy the Book

Judges comments: "This book about Gerald D. Hines and his real estate company stands out because it is written by twelve experienced essayists who have an expertise in architecture and/or business. Thus, they are able to bring a historical insight to their subject that helps readers appreciate Hines' significance.”

NAREE's First-time Author Award
Generational Housing: Myth or Mastery (TABS)
By Carmen Multhauf and Lloyd G. Multhauf
Buy the Book

Judges comments: "By examining and analyzing the different generations in the housing market, the authors show understanding home buyers is far more complicated than it appears at first.”

Posted on November 19 at 01:55 PM | Permanent Link | Add a Comment (1)

The following is excerpted from Financial Shock: A 360-degree Look at the Subprime Mortgage Implosion and How to Avoid the Next Financial Crisis (Pearson Education, 2009) by Mark Zandi, chief economist and cofounder of Moody's Economy.com. Here are four policy changes Zandi recommends to prevent the next financial crisis. Read all 10 in his book.

Buy the Book

Policy Step #1: Adopt a voluntary mortgage write-down plan

Many troubled mortgages could be salvaged if lenders would agree to modify them, typically by reducing the principal owed. The borrower would get to stay in the house, the lender would avoid a costly foreclosure, and the economy might avoid falling into a destructive self-reinforcing cycle in which house price declines beget foreclosures which beget still more price declines. Thus it seems both reasonable and urgent to encourage this wherever possible.

While there is no silver policy bullet that will address this problem, a number of proposals have circulated that could help. Most involve a small commitment of taxpayer dollars.(1)

Passage of an effective mortgage write-down plan faces several hurdles, including reasonable concerns that it would end up helping those who least deserve it. Lenders who faithfully observed sound underwriting methods would not benefit; nor would those homeowners who are working hard to keep their mortgages current despite financial strains.

The counter-argument is that the housing problem is so serious that it threatens the honest and

diligent as well as those who made big mistakes. The cost to the overall economy in lost jobs, wealth, and tax revenue if troubled borrowers do not receive financial help will almost certainly be greater than the cost of bailing them out.

Although there is no guarantee that such a plan will be adequate to the problem, it is worth the effort.

Policy Step #2: Establish clear mortgage lending rules

A number of steps have been proposed that could prevent a repeat of the housing meltdown once the current crisis is past. Most notable would be the Federal Reserve’s adoption of clear guidelines for appropriate mortgage lending: Under the Fed’s proposed rules, lenders must consider the borrower’s ability to repay and also verify the borrower’s income and assets. Prepayment penalties are barred if a homeowner refinances within 60 days after an adjustable loan reset, and borrowers must establish escrow accounts for taxes and insurance.

These commonsense lending rules would apply to all mortgage lenders given the Fed’s broad authority.(2)

Policy Step #3: License mortgage brokers

There is widespread agreement that all mortgage brokers must be licensed. Unregistered brokers were among the most unscrupulous lenders during the housing boom. State banking regulators are working to set tougher standards for brokers by requiring applicants to pass proficiency tests and to be fingerprinted by the FBI.

State regulators have also launched a nationwide lender information system: an Internet database with pending enforcement actions and background data for all licensed mortgage brokers and lenders.

Policy Step #4: Expand data collection

A lack of timely and accurate information hobbled policymakers’ ability to respond to the subprime financial shock. Data on mortgage delinquencies and defaults comes from a variety of mostly private sources, making it nearly impossible for regulators or others to see the crisis as it grew. No government agency tracks the number of mortgage foreclosures, for example, and the various private sources of such information are limited in various ways.

A ready mechanism for expanding the government’s data collection already exists under the data collection efforts required by the Home Mortgage Disclosure Act. HMDA requires most mortgage originators to report some information on all loan applications and approvals. This includes data on the lender, location, income, and ethnicity
of the borrower, whether the loan is a first or second lien, whether it is a purchase loan or refinancing, as well as the loan’s amount and its interest rate.

Reporting requirements should be expanded to include mortgage servicers, who in most cases are also the lenders already reporting under HMDA. Servicers can provide information on delinquencies and defaults as well as on whether various types of loans and borrowers are having credit problems. Reporting under HMDA should be more frequent—it currently occurs annually—and data releases should be accelerated.

The HMDA data for 2006 wasn’t fully released until the Fall of 2007. More frequent updates and more rapid reporting would help policymakers and lenders spot credit quality problems earlier and allow them to respond better to developing problems.

Endnotes:
(1) Most notable include the plan cosponsored by Congressman Barney Frank and Senator Christopher Dodd described in Chapter 13 (see inancialservices.house.gov/FHA.html). FDIC Chairwoman Sheila Bair has also proposed a write-down plan (see www.fdic.gov/consumers/loans/hop). Zandi has also put forward a proposal (see www.economy.com/mark-zandi/documents/Home-Appreciation-Mortgage-Plan.pdf)
(2) As discussed in Chapter 10, the Federal Reserve was granted this authority under HOEPA.

Posted on November 12 at 10:02 AM | Permanent Link | Add a Comment (0)

By Melissa Dittmann Tracey

If you haven't already, be sure to check out our book review on Leadership and the Sexes. The Weekly Book Scan talked with the book's author and gender expert Michael Gurian to gain more insights into how the sexes communicate differently.

Do your findings on gender differences among leaders in the workplace apply to other relationships too—such as real estate professionals' relationships with their customers?

Gurian: This book is for any male and female interaction at any level. When we looked at the companies that provided quantitative data to us for the book, they were using it at all different levels. It's not just training CEOs, but they are training everybody to understand the gender differences. There is an immersion in the culture that transfers to a real estate office or even just a single practitioner to get training in it. These are hard-wired gender differences, and understanding men and women better and getting the tools to improve your communication will make you more effective.

Is there a risk that these findings on gender differences can be used as stereotypes in the workplace?

Gurian: There really needs to be some immersion in it. If the company or individual, does not immerse themselves in understanding it then they will be prone to stereotype. There's so much popular information out there and you can scan an article and in two minutes and believe you understand men and women. That leads to stereotypes.

Think about marriage: You don't Google three tips on marriage and assume you've got it. It's ongoing in developing the relationship and you're constantly gathering data and relational information on each other to do better.

This [gender research] is a million years of human history and brain development. The craft of this book is that it allows for real estate professionals to immerse themselves on how to negotiate and communicate differently, it outlines the sources in the brain, and provides communication tools. It won't leave you stereotyping, but if you just go to one article, you might.

Learning to become strong negotiators is an important skill for real estate professionals. What are some key ways that men and women negotiate differently?

Gurian: There are lots of levels to this [NOTE: If you own the book, see Chapter 5 and the communication tools in Chapter 6]. When men and women are in a negotiation, there's a different biochemistry at work.

When it's a more intense negotiation, testosterone—an aggression chemical—goes up in men. So we might do knife gestures, pointing the finger at the person or a knife gesture at the contract, or we might interrupt the other person more.

At the very same time that men are getting more aggressive, women want more signals of

stable bonding. They may not be paying positive attention to this guy because he seems too aggressive.

So this brain chemistry creates a mismatch in negotiations. When a negotiation falls through, they may not know why a deal went sour. A lot of deals get lost this way.

What can you do to improve your negotiations with the opposite sex then?

If you alter your skill-set you can become better negotiators. In a negotiation, men will realize they need to nod more when women are talking and not squinting or frowning, which can be viewed as aggressive behaviors.

Men need to ask her more questions (such as what did she like about that room?). Men need to realize that sensorial details are really important to her, whereas these sensorial details tend to be of less concern to males.

When testosterone levels go up in a negotiation, men can bring it down by being self-aware of their behavior. They can go back to asking questions and work on building rapport; otherwise they may lose the deal.

On the female side, they might tend to use a lot of words. At a certain point, the male brain will start zoning out. Women can realize this and get back to the facts and data.

By learning the biochemistry, we can adapt to one another. We don't change ourselves. We can be successful as man or woman and be authentic and develop a skill-set that fits this type of man or woman.

But is there any conformity that needs to take place to become gender-neutral in the workplace?

Gurian: It's about balance. Through understanding, we can view these brain scans and we can gain balance by understanding the differences. We can then develop new skill-sets and tools to deal with the differences. The book is divided into these areas.

We can key into the main differences we face and create applications that fit individuals and our teams. First, we understand men and women like never before, such as with conflict resolution and negotiation. We then can start applying this into all of our relationships.

The ultimate goal is balance and trying to get everyone working together on male and female teams. One way to balance it is to create these male-female teams. It's very simple. By putting the two together, you get the advantage. For example, in a negotiation, it would be good to have a male and woman negotiation team on your side. Women pick up more facial cues.

In your book, you reference gender-balanced meetings. What are a gender-balanced meetings and what are a few ways leaders can make their meetings more gender-balanced?

Gurian: You have a male leader of 10 people but you only hear from three people at the meeting and those are three guys. Why do we hear from them? Their testosterone goes up and they become more aggressive. This could be true for a male or female leader. But then you have seven people you did not hear from. That's an imbalanced meeting.

If a female is leading a meeting, she may talk a lot and use all words without any graphics or charts. She probably lost the two or three males in the room. They aren't "word" people. That's imbalance.

The men may be tapping their pencils or their eyes glazing over. The woman doesn't understand that and gets offended. She doesn't realize that men are going into rest state – we have brain scans in the book that show male's rest state. The female brain doesn't do that, though.

So the meeting then becomes a conflict because she feels she isn't being treated very well.

Meetings are a crucible of difference. In a gender-balanced meeting, everyone understands each other. The female leader brings in more graphics and those guys who zone out are allowed to move around and keep their brains alive. And the male leader will not allow others to keep interrupting women when they are trying to talk. This all helps to create more balance.

Do personality conflicts in the workplace often stem from gender misunderstandings then?

Gurian: Some of it is just personality conflict or personality frictions. Personality is hard-wired, just like gender is. Everyone brings those in and some may be an extrovert or an introvert and the conflict may not relate to gender at all. A lot of personality conflicts deal with projection. A person is working with someone else and is projecting onto that person because that person may remind them of a person they were hurt by. But yes, some grow from these gender differences.

How can this apply to mentoring relationships in the workplace?

Gurian: It's best to have men and women mentors in the workplace—men mentoring women; and women mentoring men. We really want same sex and cross mentoring. One reason is that men tend to mentor toward promotion and hierarchy climbing, whereas women's mentoring tends to be more psychosocial. Women read signals of other people better so they might get better results by teaching how individual relationships interact better to have more success. Men, on the other hand, mentor to climb to the top of the company and women need that kind of mentoring too. So we train people that good mentoring systems include both men and women.

What prompted you to explore this topic in a book and training manuals for companies?

Gurian: In 1983 in graduate school, we were being taught about gender roles. While it was valuable, we didn't look at natural differences between men and women. I lived in many different cultures as a child and in every culture I noticed that boys and girls had certain characteristics and it didn't matter the culture they were from. With gender roles, society decides that. But I wanted to explore what goes on under the surface.

Posted on November 4 at 10:17 AM | Permanent Link | Add a Comment (0)