Real Estate Vocabulary

In honor of studying for my Broker's Exam, I thought I would write an entry about the vocabulary that really is used in real estate listings. These are not the legal terms that all agents and brokers are required to learn for their state licensing requirements, rather, words that are used in the marketing of our listings on a regular basis.

This vocabulary is intended to help the average consumer understand what they see in our listings just a little bit better.

Without further ado:

A

Approximately XXX square feet - We have no idea how big it actually is.

B

Beautiful - The most overused of all Realtor terms. Means "I lacked inspiration and I read somewhere that using the word 'beautiful' will inspire buyers to pay more for this house."

Big enough for the whole family -As long as it is a family of mice.

C

Custom - Seller had it built/installed himself. You will probably want to tear it out/down.

Cute - Small. Very, very small.

D

Den - The oddly-shaped, windowless room under the stairs.

Designer Paint - Not white.

E

Elegant - Everything the seller owns is in storage right now.

Exquisite - Similar to "Beautiful."

F

Finishes (as in, "top-quality finishes throughout") - Normal people refer to this as trim or woodwork. May mean that the seller bought a $15 door trim kit and installed it himself, then added $1,000 to the price.

First-Time Buyers (as in, "Attention First-Time Buyers!") - People with no money, willing to live anywhere.

G

Garage - This is the room that your cars may or may not fit into, after you load it up with all of your stuff.

H

Handyman's Special - Tear down that may actually be falling down. Get an inspection.

I

Investor's Dream - Cheap. See Handyman's Special.

J

Just Listed - This house has been on the market for three months. Please buy it before the seller fires me.

K

Kitchen Upgrades - The garbage disposal (refrigerator, diswasher--insert your appliance of choice) crapped out and the seller had to buy a new one. And he would like YOU, Mr. Buyer, to double his money.

L

Lots of Upgrades - We painted.

M

Many Upgrades - We had the carpets cleaned.

N

Natural Setting - You have to go 10 miles down a dirt road to get to it, if you can ever find it.

O

Open Space - The county won't let me build on it but is taxing me for it anyway.

P

Pastoral Setting - See "Natural Setting." Think of the movie "Deliverance."

Q

Quality (as in "Quality Finishes") - Home Depot special.

R

RV Space - We paved over our entire yard.

S

Seller is motivated - Desperation, people. It's not pretty.

Staged - The listing agent made the seller get rid of his stuff, and also his 30 cats.

T

Truly (as in "Truly beautiful") - I had some extra space in this ad, and nothing else relevant to say.

U

Unbelievable - This one depends on context. If it says "unbelievable view," the house probably has a pretty good view although it may or may not be obstructed. If, however, it just says "Unbelievable!" that usually means that we're hoping you won't notice that the roof is about to cave in. It's only unbelievable because you won't believe someone would actually list their house for sale with it looking like this.

V

Value-Priced - House has nothing going for it except a low price. See "Handyman's Special."

W

Well-appointed - The seller is taking everything with them.

X

Extra Large - Average size.

Y

Why Wait? - Frequently seen on new construction. Means roughly "We're lowering the price in a week." You should wait.

Z

Zilch - Hey, I did pretty good keeping this up all the way until the end but I can't think of anything for Z.

This list is mostly for fun, but I also wrote it to let buyers know that sometimes, words don't mean what they seem to mean. So, read carefully, and to get the most from your home search work with a buyer's agent who previews properties for you.

This is also an admonition to those of us in the business to remember that a lot of these words are overused, and in some cases are not understood the way we meant them, so we must choose our words carefully!

North Sound Round Up, Part Two

Mukilteo's mayor got a raise, but the pay is still less than the mayors of other nearby cities of similar size, and by my estimation, he is also paid less than the salary of a good administrative assistant. Now, I don't purport to be an expert, but I am thinking the job of mayor is more complex, by far, than what your average administrative assistant would be expected to handle.

Part of the issue with bringing the pay scale for the position of Mukilteo's mayor in line with what a mayor of a city this size would be expected to earn, is the question of whether or not the job should be a full time one or not.

According to Mayor Joe Marine, the job is effectively a full time one whether it's paid as such or not. Others in the community feel that the mayor's job should remain a part time position. When Marine was elected, the position was understood to be a part-time one so some people feel that when Marine chose to run for the office, he should have been prepared to do what he was elected to do based on the pay scale as offered.

I think there is probably some merit to that argument, but on the other hand, I think this is part of a larger problem that the city of Mukilteo seems to have with adapting to change. It seems to me that what once worked for Mukilteo as a small town, can't be expected to work as the city continues to grow. The last 20 or so years has transformed what was once a sleepy little town into now a fairly large suburb. And I would expect that the growth will continue with the healthy economy that we enjoy. So, pretending that we are still a town too small to need infrastructure, to need planning, and to need full time employees to help manage the growth that we are experiencing, seems rather short sighted to me.

Now that I've thrown my hat into the ring on THAT little argument...

Across Puget Sound from Mukilteo, the Clinton ferry terminal on Whidbey Island has been renamed for late Washington Senator Jack Metcalf. I had the good fortune in my life to be acquainted with Mr. Metcalf growing up on Whidbey Island. He was a good man--had a farm not far from our home in Langley and I have fond memories of going to his farm to buy fresh, unpasteurized milk. I also experienced electric fencing for the first time on his farm! He was described by the Seattle Times as "having a reputation for independence and quirkiness." Sounds like a Whidbey Islander to me!

Finally, a real estate tidbit from the Zillow Blog. Today's post called, "Selling or Buying, Better Check that Calendar!" talks about the best time to list or buy a home. No, they are not talking about which month of the year is the hottest buyer's or seller's market. The topic is what day of the week, is the best time to list or make an offer.

Best time to list? Thursday morning. List any earlier in the week and your listing is stale by the weekend. Wait any longer, and you could miss some of the buyers that are searching for homes to tour that weekend. Thursday also gets you on the hotsheet for the buyer's agents that are planning tours for their clients.

Best time to buy? The first Tuesday morning of any month. Why? Because sellers will have just paid their mortgage on the first of the month (ouch!) and by Tuesday they will have given up on receiving any other offers based on the previous weekend's showings.

I think these are interesting thoughts, but there are a couple of other things that clients need to consider. For instance, when listing your home in my area, a Thursday listing will eliminate the possibility of getting your home seen on our Broker's Open, since those occur on Thursday. And in my office, our office tour is Wednesday, so a Thursday listing would mean that clients wouldn't be able to be on tour until the following week.

Northsound News Round-up

I'm a bit short on time today, but I've been saving up tidbits for the blog in my Google Reader, so I'm going to round 'em up and head 'em out!

This year's Seattle Street of Dreams home show is now in progress. This SOD differs from previous years in that the show is incorporating a focus on green building techniques. Though the homes featured are still large by any definition and of course they feature all manner of bells and whistles (this is about dreams after all!) , square footage is capped this year at just under 5,000 asf. Street of Dreams takes place in Quinn's Crossing, a community of 48 homes near Maltby.

Redfin has announced that it has received $12 Million in VC funding from Draper Fisher Jurvetson, and is now open for business in the Washington DC market. This has been covered with varying degrees of seriousness all over the blogosphere, but I'm going to chime in with my own two cents here anyway.

The real estate industry today reminds me very much of the IT industry about 8 or 10 years ago. I was involved in that industry at that time, and I recall that retailers were very concerned that their brick and mortar business model was doomed to go the way of the dodo, with the advent of companies like Amazon.com, Drugstore.com, etc. There was a huge influx into the Internet marketplace of online retailers and discounters. Some of these retailers have lasted, and others burned bright and flamed out.

Take as an example, HomeGrocer.com. The media played it up that ordering groceries online was the wave of the future, and competing grocers were concerned that it was a threat to their business model. HomeGrocer soaked up huge amounts of VC funding, but never turned a profit and eventually went out of business.

Even those pure-play dot-com retailers that outlived the dot-com bust, such as Amazon, still struggle. Meanwhile, those companies that effectively combined the best of the web with a brick-and-mortar presence eventually won out. Look at Nordstrom--fabulous website, and fabulous service whether you visit their store online or in real life. At Windermere, we often look to Nordstrom as the gold standard of service and what we should aspire to in our business.

The major real estate brokerages had it good the last few years, with lots of easy sales and plenty of cash to go around--very reminiscent of the 90s dot-com boom. The industry has NOT been quick to adapt to changes in the marketplace but by and large we have a business model that still works. It could be more consumer friendly, and we need to be more proactive about adopting technology.

Technology will revolutionize real estate and the way we do business will change. But the real estate agent will survive, even if we do our jobs somewhat differently, because we provide a service that people want and need. Maybe not EVERY person will need a real estate agent in the future, but enough of population values what we do that we are in no danger of following the dodo into extinction. Though, I would say that the easy money of the last few years has inflated our ranks, and it's likely that there will be a thinning coming. And frankly, it will be good for the industry to have that happen.

What I hope from all this is that companies like Redfin will help the industry move in a more consumer-friendly direction, and that it will force the industry to embrace change, rather than resist it. But will Redfin be the one to outlast the field? I don't think so. They just don't seem to have a business model that will take them to profitability, and they don't have the kind of universal appeal that will allow them to work with the population at large. They are and will always be a niche player. But we do NEED what they are bringing, even if we don't always like it.

Okay, moving on!

There's been ongoing talk of converting the Smith Tower office building in Downtown Seattle into condominiums. Looks like we are a step or two closer to having that happen. The developer is down to the last city approval before they can move forward with the project. Seems like that would be a pretty cool building to live in, if they can upgrade the systems to modern standards. In particular, a faster elevator would be good! And it's a great way to preserve an important piece of Seattle history.

Last item. 3Oceansrealestate blog ran a great feature this morning on how to know when it is the right time to buy a home. Regardless of what the market may or may not be doing, here are the factors buyers should be thinking about:

• You found the home you really want and you can see yourself living
  there.
• It’s affordable.
• You can get a reasonable loan.
• It will serve you and your family for years to come.
• You’re not looking for perfection.
• No home is perfect.
• You’ve given up trying to beat the market.
• You’re comfortable with your compromises, whether it’s location, size,
  price, features, or condition.
• You’re confident the home you’ve chosen is desirable enough that you will be
  able to sell it in any market.

While it makes sense for investors to try to time the market, with home-buyers, it makes less sense since you are talking about a longer holding period, and also, there are other reasons--tax relief, pride of ownership, stability, etc.-- to buy besides the investment possibilities.

Okay, that's it for today. I. Am. Outta here!

Carnival of Real Estate is Up

And my first submission to the carnival, "Salesperson or Consultant?" is listed! I didn't win, but glad I submitted anyway. Thanks Marty Van Diest of Wasilla Valley, Alaska for hosting the Carnival!

Lease Option Purchases

One of the conversations that I always find difficult in my job is when a person comes to me wanting to buy, but is unable to because of credit issues. It's frustrating because I can really sympathize with people who are in this position, but unfortunately, I can't give them a lot of good alternatives to solving the problem. The reality is that it takes time to establish a poor credit history, and it takes time to turn things around. But people are always hoping that there is some quick-fix or a secret way to improve their credit, or some way that they can buy a home without having credit history be an issue.

Keep in mind that having poor credit doesn't always mean that a person is totally irresponsible. Sometimes it does, but there are a lot of other reasons why a person can have a low credit score. So, when I am having this conversation, I don't judge and focus mainly on what to work on going forward so that the client can achieve their goal of buying a home.

One of the things that comes up with some frequency is the idea of a lease option purchase. The client may have seen TV commercials or signs up by the road saying things like "Bad or no credit? Let me help you Lease to Own."

Folks with credit issues will ask me if I think this is a good alternative for them. Unfortunately, I have the unenviable task of saying no, given what I know about these kinds of deals.

Why? Well, typically on a lease option purchase you are putting a buyer with credit problems together with a seller who has an overpriced or otherwise unmarketable property. Think about it--if the seller could unload the property today, rather than a year or two from now, why would he choose this route? And if the buyer could buy today, why would they choose go this route either?

While sometimes it can work out, more often it is a recipe for disaster.

Let's look at the seller's side first. Most sellers will only consider doing a lease option if they are unable to sell in a normal-financing transaction. And why would that happen? Because the seller did not price his property at a level where there is market demand--in other words, it's overpriced.

That's one scenario. Another involves a seller who doesn't even try to sell his property in a normally financed transaction. This is the serial lease-option seller, and he is basically hoping that your lease-option purchase falls apart. Here's why.

In a lease-option, the buyer pays an earnest money deposit just like if they were going to buy the property outright. This is usually between $5,000 and $10,000 depending on the purchase amount. This is non-refundable, as compared to the deposit amount on a normal lease, most of which is refundable.

So, the buyer hands over his earnest money, and then pays rent for a year or two while trying to clean up his credit.

If all goes well, at the end of the lease period the buyer gets a loan and buys the home. But very often, this doesn't happen. Frequently, the credit problems are bad enough or the bad credit behavior is ingrained enough, that the buyers are not able to get their credit cleaned up enough in the period of the lease to qualify for a loan they can afford. Or, perhaps the buyer discovers there is a problem with the home and decides not to buy it. If this happens, at the end of the lease the buyer may have to walk away from the transaction. That means they also walk away from their deposit.

At this point, the seller may do another lease option, and collect another deposit from another buyer.

The serial lease option seller can put his property on the market over and over again, collecting $10,000 from each buyer, in addition to rent money. The property is making him money whether the individual buyer is able to close or not.

Sellers can lose out with a lease-option too. Sometimes the buyer decides to back away from a lease-option purchase for other reasons besides credit. If the market happens to be weak at the end of the lease period, the seller may have to put the property back on the market at a lower price. But, if this is the case, at least he has the earnest money amount from the first buyer.

Now, I'm not saying that there is never a time when a lease-option couldn't be the right course of action, and I'm not saying that every one of these transactions fails. What I am saying is that both the buyer and the seller need to control their risk by having their eyes wide open about what they are getting into.

And for buyers with credit issues, the truth is that the best way to resolve those problems and be able to buy a home of your own is to find out what factors are affecting your score negatively, and resolve those issues. This approach takes time, but it is the best and safest way to go.

Salesperson or Consultant?

Real estate is a funny business. There are so many different kinds of people involved in it and so many different ways for people to manage their business that I think it can be very difficult for people who are new to the industry to figure out how they can be successful in this business without selling their soul.

The challenge is, if you got more than 5 Realtors or mortgage folks together in a room and asked them what their role/job is, you would probably get 5 different answers.

That said, it really boils down to TWO basic philosophies. You are either a salesperson, or you are a consultant.

The salesperson is the guy or gal who really just wants to get you to sign on the dotted line, and doesn't care what happens after that. They don't care if the house is a piece of crap, or in a declining neighborhood, or what kind of mortgage you've gotten yourself into. All that matters is getting you under contract, and collecting their check. After closing, you will probably never hear from the salesperson again, because he has moved on to greener pastures.

On my "sunny optimist" days, I would like to believe that there are fewer of these people in our industry than the industry's detractors think. On my bad days, I fear that our industry will be destroyed by the "salesperson" attitude, no matter how many or how few of them there might be, simply because when an individual has a bad experience, it has a much stronger power over their actions and perceptions than a good experience. They say that if you have a good experience you will tell three people, and if you have a bad experience, you will tell ten people. So, obviously, the bad experiences have a lot more power over the minds of the average consumer than the great experiences that some individuals may be having.

For this reason, the salesperson is constantly trying to find new clients who haven't heard about his crummy service, rather than cultivating the relationships he already has, and ensuring that each and every client has a positive experience. He can't slow down and take the time to educate and inform his clients, he's too busy looking for the next kill.

The consultant type, on the other hand, is really more focused on making sure that his clients' needs are met--both with regard to the home or mortgage product they buy, and also with regard to the service they receive during the process. The clients' wants are important too. The consultant is interested in helping you solve problems both before and after the sale. The consultant understands that his job is really about relationships. He needs to be able to stand behind whatever he's sold you, so that he can look you in the eye after the sale is over and continue to be the person you choose when you need his services.

The consultant will take responsibility for you, help you understand the pros and cons of whatever choices you may be facing, and generally display a level of caring that goes beyond a simple salesperson/customer relationship. He will refer to you as his client, most likely, rather than as a customer. He sees his role as that of a trusted advisor (the definition of "fiduciary," a concept which the real estate industry is moving away from at its peril). He is focused on the relationship, the experience, and the service, rather than making the sale or cashing the check. He is focused, quite simply, on you.

I got to thinking about this today because of these two posts:

Blown Mortgage: The Responsibility of Mortgage Brokers...

Rain City Guide: Buyer Beware...

In our industry, we have the ability to enhance, or RUIN, people's financial lives, and that is a responsibility that must be taken seriously. I believe that only as a consultant can a Realtor or mortgage broker provide services that reflect the serious nature of the business that is being conducted.

Professionalism in Real Estate

Reba Haas over at Rain City Blog wrote and excellent post about the sometimes contentious relationship between real estate agents and attorneys. She was responding to an attitude in the industry that attorneys are deal killers and that agents therefore avoid using them when they should, and as a result wander dangerously close to the unauthorized practice of law. She wrapped up her post with this:

This brings me to a subject I want to blog about in the near future -
raising the level of professionalism of the real estate industry in general.
That, and getting agents to stop those old sayings of things like “buyers are
liars and sellers are worse.” When I got in the industry 4 years ago I
couldn’t believe people in the industry said stuff like this around me all
the time. It seems like an ”us vs. them” mentality. How messed up is
that!?!? If you’re a professional you don’t walk into a meeting with a
prospective client with this kind of mindset and I’m glad that I don’t.

I have to agree with Reba. I have always thought this kind of thing was just appalling. These are your clients you are talking about, and to bad-mouth them is kind of like bad-mouthing your boss. It's a bad idea. In fact, it's worse than bad-mouthing your boss because this is such a competitive industry. Why not try having a little gratitude for the fact that you have a client? Why not also try improving your skill at working with buyers so that they don't end up in a position of wanting to lie to you? Why not provide better service so your relationships with listing clients will be stronger?

I know of some agents who seem to actually resent having to work and provide service to their client. This is a tough industry to be successful in, but the ones who will be successful are the ones who are good at building real relationships with their clients. It's hard to do that if you only care about the check, don't enjoy the work, and most importantly, don't enjoy the people.

A Marketing Process for Selling Homes

I came to real estate from the consulting world, where everything is done via a defined process. I've spent most of my career in real estate trying to develop and apply a strategic process to marketing the homes I list.

I like to break it down into stages that take place before, during and after the time a seller lists their home for sale. To my mind, the preparation is really what will determine whether you are successful in selling it. Everything else--pricing, promotion, etc., will depend on how well prepared the property is.

The first step in the process is to understand your target market. In real estate, the question we must answer in order to be effective as listing agents is, "who is the buyer that will buy this home?"

Not every home appeals to every buyer out there. You wouldn't market a high-rise urban condominium in the same way you would market a retirement community, suburban residence or a luxury estate. Each of these has a different target market and has to be marketed differently.

So first, you have to identify your target market and understand what is important to them. What makes them get excited about one house, or product, over another? What is the best way to reach them? How do they make decisions? Once you know the answer to these questions, you can proceed to the next steps--developing the plan to attract the targeted buyers, implementing the plan, and then measuring your results.

Let me give you a real world example of how the preparation and target marketing part of this works.

I recently had a listing appointment with a seller whose listing had expired. They called and invited me to come and present a marketing plan to them and identify some of the reasons why their house hadn't sold.

The home was a lovely newer construction home on a greenbelt, with a low maintenance yard, in an upwardly mobile neighborhood. Most of the families have young children, and two parents working. They tend to stay in these homes for 3-5 years. It's a mid-price commuter neighborhood in an affluent area, surrounded by homes selling for as much as twice what these homes sell for. The neighborhood is on a golf course.

All of the above tells us a lot about our target market. They see this neighborhood, with it's smaller, attractive and conveniently located homes, as a good stepping stone towards the lifestyle they aspire to. This is the kind of neighborhood where staging makes a big difference because its not just about the four walls, it's about the life they envision living once they are in the home.

Unfortunately, the home had not been staged in its previous listing. In fact, because the family didn't have much furniture, most of the spaces in the house were used as play areas for the kids. The previous agent had taken pictures of the home with kids' toys cluttering the shots. Poor lighting exacerbated the problem, making the home appear dingy in pictures. The home still had the original flat finish builder's paint and was in need of some color treatments to bring life to the rooms. And furniture was needed to help buyers understand the potential of the rooms and how the home could fit their lifestyle.

The marketing plan for a home like this one would have to solve the issues of room usage, clutter, lighting and color. The price for the home needs to be right as well. And the home needs to be marketed to those buyers who are most likely to buy. For the demographic looking at this type of home, internet marketing is probably the most effective tactic.

People often ask, "can't buyers look past that and use their imagination?" The answer is no. Buyer's need to be shown that a home is right for them. Without furniture, without some color, without a feeling of space and light, it is hard for a buyer to imagine what their life will be like when they are living in the home. Without good pictures, it's hard for buyers to understand why they should come to see THIS house, when there are others on the market that may look more inviting.

This all comes down to packaging and preparation. You have to package your product so that a buyer can appreciate what it has to offer. To do it, you have to understand who your buyer is, and how to appeal to them. This is the kind of expertise that makes the difference between selling for full price, selling for less than full price, or not selling at all. And it's what home staging is all about.

Home Pre-Inspections and Doing the Right Thing

One of the areas where real estate agents can provide a good deal of value to sellers is in the process of preparing a home for sale. In recent years, many homesellers have realized what developers have known for years--proper preparation is a huge part of getting ready to sell. It's not just about making sure the beds are made and the grass is mowed and the furniture nicely arranged, it's also about making sure that you don't get blindsided somewhere down the road with having to address "delayed maintenance," or those maintenance tasks that were put off until later or half finished. Your home needs to be ready to sell in all respects, not just the cosmetic details.

That is why I recommend to all my sellers that they have a home pre-inspection done. It serves several purposes, and costs very little relative to what NOT having one done can cost--think rescinded or low-ball offers. The first purpose it serves is to help you identify any major or minor jobs that need to be done. Just because a problem is identified--such as failing siding or a roof needing repair--doesn't necessarily mean you have to address it, but it gives you an opportunity to determine your strategy for dealing with any issues. Forewarned is forearmed, as they say.

The second purpose it serves is as more of a marketing tactic. A good real estate agent will often create for your home a "marketing book" that contains all the pertinent information about your home and neighborhood. Buyers love these--they love being able to go through them at their own pace and learn about the house in question. In the ones I provide, I usually have a few pages about the town and neighborhood, the schools in the area, all the title information for the house itself, pictures of the home and flyers, mortgage information. When a seller has a pre-inspection done, we also include the pre-inspection and a letter detailing all the work the seller has done to prepare the home for sale. It shows the buyer that the seller is pro-active and not just waiting to sell the house to the "greater fool." It can actually encourage a buyer to make an offer on your house as opposed to another, because the home has been better cared for and the seller will be more reasonable.

Some sellers, of course, feel that this is unnecessary and of course, it's their house and ultimately they have to decide how much they are willing to do to get it ready to sell. In some cases, it might make even make more sense to sell a house in more of an "as-is" condition and not worry about doing the fixing up. Some buyers are looking for a "fixer-upper" and if your house falls into that category, then you want to let the buyer take on the expense and hassle. That's where they are going to add the value and take the profit. However, if you would rather take the profit yourself and get the best price you can, it's something to consider. Just realize that you will not be able to get "top dollar" for a house that is not in "top dollar condition."

The other argument I sometimes hear is, "well, it's a seller's market and with so little inventory out there, buyers are just lucky to buy whatever they can." This kind of falls under the "a sucker is born every minute" category of thinking. A year or two ago, maybe you could get away with thinking this way, but since rates have started to go up, we are in a different market. It's still a fast paced market, but buyers are being much more careful about what they buy and making sure that they are not committing to a house that will be a money pit. They are not desperate to get into a house this week or this month just because interest rates happen to be low and there isn't much to choose from. Rates are good, but not good enough to create a "feeding frenzy" type of atmosphere. This is a good thing. The kinds of price increases that real estate experienced in the last few years will inevitably slow down as interest rates go up. Sanity will and must return to the real estate market.

Sanity is good, peeps.

Everyone wants to get as much money out of their house as they can, but sometimes in our haste to save a few dollars, we can actually end up costing ourselves in the long run. The cost of an average home inspection is $300 to $400 dollars. The repairs themselves can be considerably more. But these expenses pale in comparison to what it may cost if you lose a deal based on inspection issues, fail to recieve any offers, or if your home is sold with undisclosed and unrepaired issues and a buyer decides to sue.

Ultimately, doing the right thing always pays. And as Wilford Brimley would say (anyone remember him?) "It's the right thing to do."

The Golden Rule in Real Estate

I was just thinking about a situation that came up recently, and wanted to write a little bit about how I think the golden rule applies in real estate. And no, I'm not talking about that golden rule that says, "he who has the gold makes the rules," but rather, the one that says you should do unto others as you would have others do unto you.

Every real estate agent out there, no matter what company they work for, has the ability to pretty much decide how they are going to do business. Obviously, we all have to obey the law, but within the law, there is a lot of grey area. There are things you can do that are legal, but may not be ethical or proper.

For instance, is it ethical to undertake an action that serves your own client well, but basically "screws" the person on the other side of the table?

For instance, say you are working with an out-of-town investor client who wants to buy a property. Maybe this investor doesn't even come to town to see the properties before making offers. Maybe their agent simply selects three of the best, then the buyer makes offers that are subject to inspection on all three, and no disclosure is made that this is the case. After inspection, the buyer rescinds two of the three offers, selecting only the house that is in need of the least repairs.

Smart, right? But what about working in good faith?

When this is a buyer's strategy, the seller usually doesn't know about it, and then when the inspection is disapproved and the transaction terminated, they now have a house that is less marketable because other agents all know that this is a house where something went haywire during inspection. It's a pretty crappy thing to do to a seller who is working in good faith and would have been willing to make the repairs. It could end up costing them thousands of dollars.

As the buyer's agent, maybe your thinking is that the only person that matters here is your own client. But remember that under the Washington Law of Agency we are required as agents to act in good faith towards all parties. This isn't to say that an agent can't still be a tough negotiator, and get a great deal for their client...neither of those things is precluded by acting n good faith.

I guess the way I look at these things is, if I wouldn't want to have someone do something to me, I'm not going to say it's okay to do it just because it's good for business.

Over-improvement

We had my husband's parents in town last week, and it is always fun when they come to visit. Went to Whistler for a couple of days and hiked around, watched crazy mountain bikers...it was lots of fun.

While they were in town, we got to talking about the house they just built. It's a beautiful log home, built overlooking a river and 200 acres of federally protected original prairie that the family owns. My parents built the home for a retirement house, because it's near their parents and brothers and sisters. The area has great pheasant hunting as well, so there is some business potential for using the house as a hunting lodge.

Sounds great, right? The only downside is that building costs overran their original loan and when they went to the bank to try to get a second loan, the bank would not lend them any more, since they already had a loan out for about the max of what comparable properties in the area were selling for. It had nothing to do with whether they were good for it or not, or how nice the house was, it simply had to do with the bank being unwilling to take the risk on further improvements to the property in a market that might not support it.

People over-improve their homes all the time, and that's okay as long as they are clear that the improvements are for their enjoyment and that they may not recoup their costs. It's important to remember that there are improvements the market will bear, and ones that it won't. If you have the nicest home in the neighborhood, that may not mean that you can sell your home for significantly more than your neighbors. The value is in the enjoyment of the property while you live there.

To know if your improvements are over-improvements, it helps to make sure you understand whether the local market will pay for the work you have in mind. Talk to a real estate agent or appraiser that specializes in your neighborhood and ask what the value of your planned project will be when completed. Then decide if you want to do the improvements for your own enjoyment or not.