Friday, June 28, 2024

The Competent Broker Now Free for Our Readers

Competence and Integrity in Real Estate?

I first published The Competent Broker four years ago this summer on Amazon.  You can still find it there.  But now, I am pleased to bring it, in full, to readers of this website.

I think the best thing I can say about this book is that:  Brokers hate it.  Well most brokers hate it.  There are a handful of brokers who really love it.  Those are the type of brokers we need.

You can find a chapter-by-chapter summary here.  And find the full, unabridged text here.

Please share widely.  A link back to this site would be greatly appreciated.

Monday, February 6, 2023

No Shopping

A Modern Real Estate Fable

Imagine if you will, a large townhouse community, in a Raleigh suburb.  All the units are the same.  Same age, same size, same floor plan, all two stories, etc.  The only difference in the units is any interior updates that the owners may have done in the ten years since it was built.

And of course, after ten years, the owners are starting to see an increasing number of units come on the market for sale.  Not surprisingly, the asking prices are all very similar, and so are the sales prices.

Now Joe has been living here since the place was built.  But his employer just went bankrupt and Joe's pretty much been living paycheck to paycheck.  So he too wants to sell.  And fast.  First he thinks, well I'll just underprice my selling neighbors, and I'll get a quick sale.  But he can't afford to lower his asking price too much, because he needs the money.  But then Joe thinks, my goodness, maybe some of my selling competitors need the money too.  I cannot afford for any of them to undercut my price, after I undercut their's.

So Joe thinks very hard and comes up with a...solution.

Now Romeo and Juliet are a young newlywed couple on a tight budget.  They've been watching this townhouse community, but realistically it is simply out of their price range.  But they continue to keep an eye on it.  And when they see Joe's for sale sign, they are the first phone call he gets.

Joe  Yes, it is for sale.  No, that is all I can tell you.  First you must sign my Non-Disclosure Agreement.

R&J  Well we never heard of such.  Why is that?

Joe  It is very simple.  As I am sure you are aware, a number of my neighbors also have their homes for sale.  And I just don't want you, or any other potential buyer, to discuss my asking price and terms with any of my competitors.

R&J  Well okay.  Seems unnecessary, but okay.

So Romeo and Juliet sign the NDA, Joe shows them the home, and gives them a very comprehensive selling package, which of course, includes his asking price.  All of which is covered by his even more comprehensive NDA.


Juliet  Well, it's just like all the others.

Romeo  But it is $25,000 cheaper.

Juliet  Yes, but can you believe how he's finished the place.  We'll have to spend at least that much on the walls, the flooring, the baths, and the kitchen.  Maybe even more.

Romeo  Hmm, let's go back and look at that other unit we really liked.

So they go back to see Fred's unit.

Fred  So you've come back.  Are you ready to make an offer?

R&J  But Fred, we've already told you that we cannot meet your price.

Fred  Yes, I'm pretty firm on that.  But it's right about the same as everyone else here.

Romeo  Well actually...

But Juliet cuts him off...

Juliet  No Romeo, we cannot discuss that.

Fred is somewhat perplexed.  But hey, kids these days.


Romeo  We should be able to tell him that he's not the same as everyone else.

Juliet  But we agreed not to.

Romeo  So we'll just have to make Fred an offer at the lower price and see what happens.

And they do.

Fred  I told you kids that my price was firm.  Why are you wasting my time, and your time, with this offer?

R&J  Very sorry Fred, but that is the best we can do.


Romeo  If we could just explain to Fred, I'm sure he would come down.  He seems like a reasonable person.

Juliet  Well, we did not have to sign that NDA.  We did that voluntarily.  Next time we will know better.  In the meantime, I think I'll write to the North Carolina Real Estate Commission and ask them to look into it.

Romeo  Hey, that's a great idea!  Their job is to protect the public.

But when the NCREC gets wind of this, they love Joe's idea.  After all, we are here to protect the consumer.  And sellers are consumers too.  It is none of Fred's business what Joe is asking for his competing unit.  We must protect Joe.  We certainly wouldn't want Fred to suspect that Joe is in any financial difficulty.  That would be unethical.

But we should protect Fred too.  Because actually it is also none of Joe's business what Fred is asking.  Joe should not have the ability to undercut Fred.  Joe needs to price his unit based on his own individual judgment and what he, alone, is willing to accept.  Not what his competitors may or may not be willing to accept.  That too would be unethical.

But why go through all that hassle with the Non-Disclosure Agreement?  No, no, what we are going to do is institute a rule that says our licensees may not disclose the details of any seller's asking price and terms to any competing seller.  Buyers should not be able to negotiate with a seller by using the asking price of any competing seller.  That is patently unethical and we are just not going to allow it.  It will be a No Shopping rule for buyers.

That way, Fred and Joe, and all of their other competing sellers are protected from all those predatory buyers.  And from each other.

So here is the rule they came up with:

A broker shall not disclose the price or other material terms contained in a party's solicitation of offers for purchase, sell, lease, rent, or to option real property to a competing party without the express authority of the party soliciting the offers.

In a Rule Change Announcement in the NCREC Bulletin, the Commission stated, "We take our mission to protect the public interest seriously and we are delighted with the new rule.  We believe it perfectly complements Rule .0115a (formerly .0115)."

In a new section in the Bulletin labeled In the Works, the Commission went on to add, "Later this year we have a major report coming titled How Single-Agent Dual Agency Protects Consumers.  You don't want to miss that one."

Public interest protected.  Check.

Sunday, March 13, 2022

On Chronic Lateness

Lateness is a signal

Here's a rule for you.  If someone is late, the first time accept their excuse.  They will always have one.  If they are late a second time, it becomes a red flag.  Start watching for personality flaws.  If someone is late a third time, cut them loose.  No exceptions.

And note, I do not mean three times in a row.  I mean three times over a lifetime.  Sound harsh?  Well, let me tell you what is worse:  Dealing with someone's chronic lateness over that same lifetime.  Remember, it's your lifetime we're talking about.  Surely you have better things to do than sit around waiting on someone else.

People are chronically late for one primary reason:  Deep down, they believe that their time is more valuable than your time. Period. This is why your doctor is always late. But it is also why your friend/co-worker/client/vendor is always late. You just have to decide how much you are willing to put up with Because it will not end.

Chronic lateness is a signal of a deeper personality issue. Most often narcissism. The lateness is bad enough, but the personality flaw will show up in everything they do and everything they touch. Just to take one example. If your real estate broker is a narcissist, and many of them are, their negotiation skills will be extremely poor. But of course, these people actually believe they are the world's best negotiators. And they're happy to tell you so.

I learned long ago to cut toxic people out of my life, and certainly out of my business. And sure, people can be toxic for a variety of reasons. But one thing I noticed is that the toxic often suffer from some degree of narcissism. The narcissist loves nothing more than keeping other people waiting. Lateness is a signal. Spare yourself. Cut them loose quickly.

Now, will this rule sometimes backfire? Sure, you will apply the chronic lateness rule to some people who otherwise would be beneficial for you. The question is, what are the odds? And how much of your life are you willing to waste to find that one in a thousand?

Lateness as a cultural norm

Now what about the argument we often hear, that lateness is a cultural phenomenon? That is, some cultures do not value punctuality as much as others. And this somehow means that we should be more accepting of their rudeness.

Which cultures? Well I most often hear Latin America.

But I'm not buying it. Why? Because I have noticed that the people in those cultures who actually get things done are not late. They do not suffer from this cultural affliction.

Brief story. I once had a client who was the recently retired CEO of one of the largest food companies in Mexico. Americans may not know the corporation by name. But they would know it by its brands. They are the market leader in their categories and can be found in every supermarket in America. The man was never late. In fact, early on I noticed that, just like me, punctuality was extremely important to him.

Anyway, it made me question the cultural norm argument. Sure, perhaps many people in some cultures are more elastic with time that I am. But not all of them. And certainly not the ones I choose to deal with.

One other point on the cultural thing. The countries that care the least about punctuality? They are the poorest countries in the world. The countries that care the most? Switzerland, Britain, Germany, Holland, Japan, the Scandinavians; they are the richest. No doubt there are other cultural factors at play. But again, lateness is a signal.

Be on time.

Sunday, January 16, 2022

How Many Brokers Are Dishonest?

Two out of three?

Sounds low to me.  This is from Canada, but it could be ANY US market.

Someone should write a book about this sort of thing.

Wednesday, May 5, 2021

How to Be a Top Producer

What is Important to Real Estate Brokers

I have no doubt that Tina Caul is correct about everything she says.  She is a master of client acquisition and script reading.  She calls this video Secrets to Becoming a Top Realtor.  But there is not one word about conveying real property in it.  Not one.

Message:  Becoming a top real estate broker has absolutely nothing to do with conveying real property.

At the end she says:  If you are a brand new agent, the first thing I would say to do is go learn a listing presentation script.  Not go learn the contract – Rather, go learn a listing script.  Not, go learn a neighborhood, study an appraisal or home inspection, take a technology or accounting class, attend a local re-zoning meeting, read a book on negotiation, etc.  You know, the whole range of knowledge and experience and expertise that is useful and helpful for serving clients.

No, no:  Go learn a script.

Why?  For these agents it is simply not about conveying real property.  For them, the entire business is client acquisition.  This is the ball game.

So I would argue that the reason brokers need scripts is because they are completely incompetent at conveying real property and have no desire to become competent.  Think about it:  If you are only marginally competent (at anything), you don't need a script to have a conversation about it.  Scripts are a crutch for the pretender.

Wondering where she turns for scripts and so-called coaching?  These guys.  Yes really.  Sure, they seem like a parody of everything wrong with the real estate business and how brokers conduct themselves.  But sadly, it's not parody.  Brokers use these methods because they work.

This says as much about American consumers as it does about real estate brokers.  In polling, Americans don't think very highly of brokers.  But I submit that the reason they think so little of brokers is directly related to the type of brokers they tend to hire.  If you hire a shallow, low-substance, script-reader, do not be surprised if you have an unsatisfactory experience.

Here, I would like to say, You get what you pay for.  But that tried-and-true adage does not work in the real estate business.  Because what brokers charge is totally divorced from their value proposition.  And if a broker uses a script to gain your business, they will almost certainly use a script to justify a high fee.  So in fact, the six-percenters are much more likely to be script-readers.

And the success of the client acquisition brokers does not go unnoticed by their colleagues.  As a consequence, transactional competence suffers industry-wide.  There is just no room for competence at conveying real property.

I do love Caul's honesty, but find myself asking:  Why is she giving away her store?  I mean this is not the first video of her's that I have shared.  I can think of no other broker who is willing to talk about these things in a public forum.  And I do not believe that she is being naively or inadvertently honest; she is way too clever for that.

I can only speculate, but it appears that Tina Caul is attempting to transition from real estate broker to real estate coach.  And evidently she believes that she must give away some free samples to make the move and, clients.

In any case, it gives us a peek behind the curtains.

Thursday, April 22, 2021

Home Buying Today

My friend Richard sent me this last night.  Hilarious.  And not far off....

Friday, April 16, 2021

Charles Ray Dawson Reviews The Competent Broker

Another Broker's Perspective

From his video I think you can tell, if Charles Ray Dawson did not like the book, he would have no qualms about saying so.  He describes the book as:  How to make money by being competent.  I like that.  Thank you for your kind words.

Find a detailed synopsis of the book here.

Charles mentions that he is going to do a separate video on dual agency.  I look forward to that.

Tuesday, April 6, 2021

Shameful Artificial Urgency

I can just about understand the buyer frenzy.  They are losing houses because of tight supply and competing offers.  Competing offers that are stronger than their own.

It seems to me that the way to win the house is to make the highest and best offer.  Period.  But they've put together their own highest and best, and they fear it is not enough.  So they look for other things they can do.  Unnecessary appraisal addenda, dodgy letters to the sellers, poorly crafted escalation clauses, game-playing offer deadlines, and whatever else they can dream up.

Like I said, I can just about understand it.  But I don't think most buyers are getting very good advice as the business is absolutely rife with incompetence.

As for the sellers, it seems to me, what we have going on is various levels of artificial urgency.  The typical home in this market will get a double-digit number of offers, some of them even sight-unseen.  Well over the asking price and with five-figure nonrefundable Due Diligence Fees.

The sellers are clearly in the driver's seat.  There is no rush.  Take your time, let the offers flow in.  Too many showings one day?  Add a day.  Add an open house.  The sellers truly have all the time in the world.  Those buyers are not going anywhere, because there is no where else to go.

But that is not what we see.  Rather, what we see is the house goes active Friday morning and the sellers demand highest and best offers by Sunday evening.  Why?  WHY??

And that is assuming they leave the house on the market for an entire weekend.

Because worse yet, we see houses go active and then pending in hours.  We see houses sold during the Coming Soon period, where the buyer pool is severely limited.  Again, why?

This urgency is entirely artificial.  It is contrived.

And I just do not believe that this is coming from the sellers themselves.  In this market, no sentient being would accept the first offer.  Or even one of the first few offers.

No, this urgency is contrived by the brokers involved.  As a listing broker emailed me a couple of days ago:  Great bird/offer in hand, take it.

As if there will not be another, better offer tomorrow.  Look, I'm not talking maybe a better offer in a few weeks (those are never better).  No, I mean tomorrow.  And if not, that bird in hand remains in hand.  Give it a day or two.  Please.

That same broker went on to make the very astute observation that:  Selling is very stressful for sellers.

Well let's see.  Ten or more offers in hand, all above asking price, five-figure due diligence.  Hmm, that does not seem very stressful to me.  Rather, the sellers are in a most comfortable position.  But to be fair, I think what he meant is that selling is a hassle.  Especially with so much buyer interest.

I have long viewed open houses as a sham.  But in today's market they finally serve a legitimate purpose:  To get as many potential buyers in the door in the shortest time possible.  Yet many brokers still insist on individual viewing appointments creating and insuring more hassle for the seller.  My advice in this market is to have an open house every day, and if the hassle of selling is too much for the sellers, limit viewings to the open houses.  Problem solved.

But my guess is these brokers do not really care about the seller's stress or the seller's hassle.  The brokers have their own agenda.

Last week, I wrote about a couple of intentional reasons that brokers encourage this artificial urgency.  And if not intentional, we're back to incompetent.  I have always been amazed when brokers proudly scream:  Sold in one day!  As if it is something to be proud of.  But they are indeed so very proud of it.

It is incompetent and shameful.

Monday, April 5, 2021

Bubble Questions

Are we in a bubble or is this the new normal?

How long will the current real estate bubble last?
Buy now and risk overpaying?
Or, wait it out?  Wait for how long?
And if we do wait now, do we not risk that the market will be even worse later?

As John Templeton famously observed, "The four most dangerous words in investing are, This time it's different."  And if we recognize that, we must assume that the bubble will burst...eventually.  Right?  But these things can go on longer than we anticipate.  And longer than some people can afford to wait.

We all know some of the causes, like record low interest rates and easier lending standards.  A record stock market.  Lots of cash sloshing around and an influx of foreign capital.  These are the usual suspects contributing to bubble inducing behaviors.

Less recognized and considered is the influx of millions of illegal immigrants and a government that tolerates and even encourages this.  This is not meant to be a political point.  But no matter what you think about immigration, nationwide our resident immigrants do use a portion of our housing stock.

But there are a few other factors that make me revisit the dangerous question:  Is it different this time?

Note, these are factors for my market, the greater Research Triangle Park area of North Carolina.  I cannot speculate as to what is going on anywhere else.  But here they are:

  • Under-built housing stock.  This will take many years to correct.  And that is assuming that there is the political will to correct it, which I do not see.

  • People fleeing high tax and high expense states and metro areas, looking for affordability, more responsible government, and quality of life.

  • The extended lockdowns finally demonstrated that offices are no longer really necessary.  Meaning that people do not have to live within commuting distance of an office.

These are not mere bubble factors.  These are long term and perhaps permanent changes in the real estate sector.  They will certainly affect the real estate market for a generation.

Will the bubble burst?  Well, it always has in the past.

Friday, April 2, 2021

Brokers and Time and Supply and Demand

Do brokers understand supply and demand?

So today we have extremely low inventory resulting in multiple offers for most residential properties.

And what do the brokers do?  They leave the homes on the market for just a few days.  The median days on market (DOM) count for my area is three days.  But you would be surprised how many houses go under contract in zero days.  That's right, the house is on the market, not for days, but for mere hours.

Why?  And, how?

Demand takes time.  That is, for all potential buyers to see a property, it takes time.  And if a seller wants the highest and best offer, you've got to give buyers an opportunity to see what they are buying.

But here's the thing.  While the seller may very well want the highest and best offer, the broker not so much.  It is not that the broker does not want it, it is rather that the broker does not care.  To the seller, a $10,000 higher offer is a vacation to Hawaii.  To the broker, it's three hundred bucks, tops.  Why wait through the weekend?  Just talk the seller into an acceptable offer and get back to your primary job, prospecting (client acquisition).

And worse, if the broker has lined up a buyer himself, where he makes substantially more money, often double, he has a perverse incentive to limit the access of other buyers.  We call this dual agency, and I would argue that it is impossible to get the highest and best offer in these situations.  I know Mr. Seller, we were going to leave the house on the market for the weekend, but I have this buyer with a solid offer, today.  These days, this often happens because the broker refused to cooperate with other brokers and their buyers.  We call this Coming Soon.

The end result is that brokers work less and/or get paid more.  Either way, the brokers intentionally limit demand.  It is not that brokers do not understand supply and demand.  I think they do.  It is that they are using it to their own advantage rather than to the advantage of their client, the seller.

Now, what is a seller to do?  Well brokers behave this way because you allow it.  Don't!  Tell your broker that you will be leaving the house on the market for a week.  Or at least, through the weekend.

As for dual agency, ask about it before you sign the listing contract.  And disallow it.  If your broker argues in favor of it, you are dealing with someone unethical.  Period.

Find yourself another broker.