Twenty years ago it took 3-4 weeks to close a motgage loan...It still takes 3-4 weeks..
What has changed…what hasn't …in the past twenty years?
The Way it was:
In 1987 the real estate examination was given with a pencil and paper (once a month) and took three weeks to get the results. The state real estate commission mailed a pass/fail notice to you.
We used a now defunct form of agency relationship with customers called “sub-agency”. Under sub-agency, buyers were totally unrepresented in real estate transactions. Sellers were represented by the listing agent as well as the agent that controlled the buyer.
There was no such thing as “agency disclosure”.
Continuing Education was optional.
It cost under $400 per year to be a member of the REALTOR Association and the Multiple Listing Service (MLS).
Every offer to purchase was hand delivered to the listing broker.
No one had ever heard of getting “pre-approved” for a mortgage loan.
There was no email, web sites, fax machines or cell phones in common use.
It took three to four weeks to close a mortgage loan.
What has changed:
A person takes the state real estate examination any day of the week by appointment and receives the results instantly.
We now have strict laws governing “agency disclosure” and a new and convoluted form of agency called “dual agency” was created.
It cost over $1000 per year to join the REALTOR Association and the Multiple Listing Service.
Real Estate licensees are required to attend six hours of continuing education per year.
Buyers need a “pre-approval” letter to look at homes for sale.
Virtually every licensee has a web site, email, a fax machine, a cell phone and blackberry.
The capability to send documents via electronic means iscommonly available. Yet:
IT STILL TAKES THREE TO FOUR WEEKS TO CLOSE A MORTGAGE LOAN.
"The Butterfly Effect"
Recently Inman News, a national real estate industry outlet, published a story called When Media coverage, Industry Interest Clash.
The story, written by co-editor Glen Roberts, pointed out the conflict in some real estate markets between local real agents and local newspapers.
The basis of the conflict is the fact that in some market areas, local real estate agents rely heavily on print ads purchased from the very newspapers that consistently run news stories with a negative slant toward the real estate industry and the current economic situation.
The specific case that highlighted the conflict was in Elizabethtown Kentucky where a real estate agent sent "hate mail" to the publisher of the local paper for running a nationally syndicated story questioning whether "now is a good time to buy a house". The real estate agent's point was that while we (real estate agents) are spending over a million dollars a year to buy ad space from you, you (the News Enterprise) are sabotaging us by running stories counter to our efforts.
The real estate agent was angry because the newspaper was not running more "localized" news about the industry. In the real estate market area in question, the real estate market was actually not that bad.
Well, the story goes on this way. The News Enterprise editor, hit with the hate mail and then a national story about it, gave in.
Other than the immediate apology from the News Enterprise, the agents that sent the hate mail that started the debate are on the front page of the newspaper today. The local newspaper painted them as local industry experts and resolved to "localize" all real estate industry news in the future.
Todays News Enterprise Story: Area Pros Offer Tips For Making A Good First Impression.
Real Estate Professionals?
The swell in the ranks of licensed real estate agents reached its all time high in 2006 of around two million licensed agents nation wide.
With the slowing market and the heated competition over the remaining customer base, many real estate agents are moving on to careers outside of the business.
Even with the remaining agents, many with only two years or less experience, there is still considerable concern over the level of knowledge and skill these people bring to the transaction. Unfortunately, in far too many cases these agents are working in companies that use the old system of "if they have a car, a drivers license and a real estate license", the are hired.
In a so far unsuccessful attempt to compensate for this training weakness, many state real estate regulatory bodies have added layers of continuing education requirements on licensees. State like NY require twenty two and a half hours of continuing education every two years. Other states, like Florida for example, require licensees to complete a forty-five hour post license course after initial licensing plus fourteen hours of continuing education every two years thereafter.
Kentucky is in the process of gaining legislative approval for adding additional training requirements in the form of a post-license course on top of the current six hours of continuing education every year.
Other groups, such as the Central Wisconsin Board Of REALTORS, have taken a much more proactive interest in improving practitioners in their market place by setting up their own localized training program for its members. Long time member there, REALTOR Mary Vils, of Direct Line Home Marketing , applauds their efforts and says that "she is happy to be a member of such a progressive organization".
The fundamental flaw in the current system is that every state has its own set of rules and licensing requirements. While the solution is not a national real estate license, standardizing factors may be.
Derek Eisenberg, broker with Continental Real Estate in Connecticut, a strong opponent of a national real estate license prefers the current system but more reciprocity between the states.
The unsuspecting public though, fooled into believing that because a person has a real estate license, they actually know what they are doing, often become the victims. Although every state regulatory body mandates that the principal broker is responsible for the supervision and training of licensees under their charge, most have no formal training program to offer.
In 2006, the Kentucky Real Estate Commission (KREC), which ran radio spots state-wide under a co-op agreement with the Kentucky Association of REALTORS, claimed that all Kentucky licensees were "trained negotiators". When in fact, there is no licensee training cover that topic.
The National Association Of REALTORS (NAR) is in a unique position to be a solution in this issue. Rather than focusing the membership money on ventures like forming credit unions and running nationwide ad campaigns that attempt to put a "smiley face" on the county's economic situation, they should reinvest in members.
One way to do that is to become a sponsor of more localized training by returning some of the millions in reserve there in the form of GRI and CRS scholarships to members instead of investing millions in lobbyist, ad campaigns and risky ventures like credit unions.
State regulatory bodies could become more aggressive at enforcing current laws that require principal brokers to take full and personal responsibility for the training of their agents too. In view of the fact that most real estate commissions are made up of brokers (usually from large firms) , this idea may be "dead on arrival" though.
Localized training on such things as agency law (which is too complex for even the average lawyer to understand), negotiation skills, contract writing and other topics are best presented at the company level….everyone in the business know this.
The NAR's campaign to "paint" real agents as "professionals", while ignoring the obvious fact that many are untrained, unskilled and even working on a part-time basis is a major contributing factor in the publics mistrust of real estate agents.
First published in the Shortt Real Estate Report, http://blog.ClassesFormingNow.com
Elizabethtown Kentucky-A Buyers Market
Based on 2006 and 2007 stats in the market, 2008 is shaping up to be a buyer's market and a substantial reduction in the overall sales volume from the last couple of years.
It's definitely the time to buy a home in this market area. With a 2008 listing inventory that is at least and perhaps slightly larger than that of 2007, buyer's have a wide choice of properties to pick from.
The most exciting news though, is that this market will experience a major shift from a 2008 buyer's market to a seller's market starting in 2009 and lasting through 2012. This shift is due to a major movement of defense department resources from other military installations to Fort Knox Kentucky in the northern part of the county.
Looking back into 2006 and 2007, we saw a listing inventory (homes for sale) increase by over fifty percent from 2006 to 2007, however, the total number of closed transaction dropped off by about ten percent from 2006 to 2007.
This situation caused an initial over- supply of homes for sale as 2008 kicked off. That over supply is what is dragging down the 2008 stats and will be reflected in less total 2008 transactions and a huge advantage for buyers that are ready to move now.
Today the average sale price for a home in this market is between $120,000-$140,000 and has remained constant since 2006 (one of the least expensive markets in the country). The most popular type of financing remains "conventional" with "VA and FHA a distant second. And finally, the average days on the market for a listed property has edged up so far in 2008 to one hundred fifty four days (154). Up from around one hundred forty (140) days in 2006 and 2007.
In summary, it’s time to buy in this area if you are ready now. Prices are likely the lowest that we will ever see and the inventory of available homes is abundant with pre-sold home and brand new homes.
For investors in rental units, the future may be even better. The huge influx of people with good paying jobs is going to create a shortage of high quality rental units starting in 2009.
This is the year to get in position for another wild real estate ride and be ready for 2009 and beyond.
REALTORS Cry Foul
At issue in some markets is the fact that this negative real estate news is placed near real estate marketing ads purchased by brokers.
On the one hand, brokers are trying to put as "pretty" a face as they can on the housing market downturn while the news media is trying to paint a realistic picture of the situation.
In Elizabethtown Kentucky, brokers recently lashed out at the local paper for its placements of a negative article in the traditional "real estate section". The news paper, The News Enterprise, has been completely insensitive to the fact that huge sums of money is spent annually by local REALTORS and they feel that they have some "ownership" in the real estate section of paper.
The New Enterprise runs very little risk of losing real estate agent ad money since they are the only game in town. They own the only viable news paper and the only monthly "Homes Magazine" published in that market area.
So real estate advertisers are just going to have to live with it. The news paper has a right (some say an obligation) to report the economic news and the real estate brokers have the right to stop buying ads (which is not likely to happen).
It looks like the real estate brokers have painted themselves into a corner by relying solely on one source for advertising for the past thirty years.
Click here to read a National Industry story that was a spin-off of this blog entry.
The Truth about Miami's Buyers Market
By Gustavo Farfan
Congressional Hearing: CEO pay in the mortgage lending business.
As usual, Democrats on the committee wanted to somehow link the two factors together but failed.
Most of the criticism was directed at Angelo Mozilo, founder and CEO of Country Wide Financial. Of course, since his company is the largest and most successful (until recently) mortage lending business in the history of the world, he was the one the Democrats went after.
Mozilo defended himself mostly by just saying that he had no interest in making bad loans; " When bad loans are made, nobody wins...not the borrower, the lender or the community" according to Mozilo.
Actually, he is only partially accurate. There are a few people that make money when bad loans are made. Not necessarily because they are "bad " loans , but because a transaction was initiated and closed (funded).
The primary person that makes money under these circumstances is the mortgage broker. It's doubtful that Country Wide employees made "bad" loans. But it is pretty clear that a lot of these loans made it to the books of Country Wide through independent brokers that submitted loan packages to CountryWide.
The question is this...Did this occur enough to throw the entire mortgage business off balance in a market that eventually became overcrowded with inventory.
The FBI is getting close to looking into this. Just announced is the fact that the FBI has launched an investigation against Country Wide.
I'm confident that they will discover no problem with Country Wide or its employees, but some of those independent brokers are about to be in the cross hairs of the Feds and may have to face the music.
REMAX Convention 3-7 March 2008, LasVegas
Report from the REMAX International Convention in Las Vegas (March 3-7 2008).
By all accounts, the attendee count was substantially down from previous years. Most of the growth in real estate brokerage activity seem to occur outside of the United States. Canada and some European countries seem to take most of the awards in terms of production and business growth.
The founder of REMAX, Dave Liniger, spoke mostly of the trends in the industry that he had experienced since starting the company in the 70’s (things will turn around in the US markets).
As at all International conventions, there were plenty of training opportunities to go around. However, overall, the convention organization lacked the “fine tuning” that you would expect from an organization the size of REMAX. I’m not convinced they had their “eye on the ball” this year. Low energy and disorganized events were common.
Great speakers such as Les Brown and Marcus Buckingham (NOW, Discover Your Strength) brought most of the energy to the event.
Next year, same place …MGM Grand in Las Vegas..See you there!