In light of this post by the Somers team on Dual Agency I feel compelled to share my thoughts on the practice. I can only speak about it from my own knowledge of the practice in New York, so agents in other states might get limited value from my thoughts.

When I list a house, I am hired by the seller to be their advocate. I work for them. They are my client. They hire me  because they feel that I have the best chance of bringing them a buyer. But if I do bring a buyer myself, they have utterly no desire for my allegiance to switch or be compromised in any way.

If I show the listing to someone without their own agent who calls on a sign or ad, they are not my client. They haven’t hired me, they are told I work for the seller, and if they want to go forward, they will sign disclosures that clearly state that I represent the seller, my client. If they ask me to represent them as well, the only answer I can truthfully give them is that I can’t represent them.  Even if they ASK, I cannot. They don’t become my client with a verbal request.

If they want their own agent, I tell them that they can go get one to represent them. But I cannot compromise my loyalty to my existing seller client. Does this mean they won’t work with me? No! People value competence and honesty. Everyone whom I have sold my own listings to since 2005 has done so with the understanding that I don’t work for them. But they feel comfortable enough to go forward anyway.

So how can dual agency occur? Only with two existing clients who want to do business with each other. For example: You list your home with me. You are my client. It sells. You then decide that you want me to represent you in your purchase of your next home. Common enough? Lo and behold, I show you another one of my listings and you decide you want to buy it. A conflict now exists. They are my client. You are my client. Aside from withdrawing the listing or you hiring a buyer agent, the only solution is for all parties to consent to dual agency. Have they lost 100% zealous, bulldog advocacy? Yes. Does it compromise their confidence in the transaction? Evidently not, because they have a relationship with me, and that trumps dumping a deal into the lap of someone unfamiliar with the transaction or the principals. Another plausible example of dual agency would be when a buyer I have been working with as a buyer agent for a while chooses to engage one of my listings.

This is rare. And it requires the informed consent of the principals.

I think many cases of dual agency are misnamed, because listing agents believe that buyers will only buy the listing if the agent promises to be dual. But that isn’t really where a client relationship comes from. Moreover, it is strictly semantics, it tempts fate if an issue arises, and can potentially cause unneeded liability.

For the record, I am fine -in theory- with dual agency in this context because a) it is already legal, b) the principals know me and I know them, and c) good will and respect typically trump the doubt and suspicion that is the acorn for the need for representation to begin with. Another benefit it shares with double ending your own listing with customers is that you have more control over the details of the transaction and you don’t have to chase another agent down for updates.

But this all boils down to understanding what makes a client and what makes a customer. Understanding that makes us better advocates, and an agent in command and confident of his or her role will be of better use to, and attract more, clients and customers alike.  

With rare exception, buying decisions are made for emotional reasons. Overwhelming a prospective buyer with lots of data in a showing will typically talk them out of, rather than into, making an offer.

Understandably, many sellers have put years of effort and money into keeping their home in good condition. They have upgraded, added on, improved and enhanced. They are justifiably proud. And that 47-point checklist of improvements and updates is valuable… at the right time. When is the right time? I’ll tell you when the wrong time is: 30 seconds after the buyers walk in. Given the slower market, many of us are taking listings which were previously with another company, and I often hear how the prior agent didn’t “push” the house enough. Often, they’ll only list with someone who pledges to sell it their (as the seller’s) way. That shouldn’t be the time to make a blanket pledge, it is a training moment. I sell my way. That isn’t arrogant, it is the voice of experience. Most lay people don’t know how people make their buying decision. It is my job to tell them.

Listing agents (or, worse, sellers who are there for the showing) who blather on about copper piping, the fireplace heatilater, artesian well, closet organizers and the arcane rationale of why they removed the linen closet in 1994 to enlarge the master bath, forget that if the place doesn’t feel like home, then they are wasting their breath. All too often, I’ll leave a showing after the agent or owner’s soliloquy and hear my buyer say “so THAT’s why it has been on the market so long.”

That’s how the information tsunami works on most buyers. There is the odd match made in Heaven when the buyer is a forensic CPA who is obsessed with statistics. But for the rest of us, the pitch is counterproductive. Just let them walk through and try the place on. Let the buyer agent do their job. And when they leave, hit them with the Magna Carta improvement handout. But for the initial showing, less is almost always more.

Remember, questions are buying signals. If they ask about the fireplace, tell them about the heatilater. Just remember that where you might see a upgraded chimney lining retrofitted for a stove insert with a state of the art blower which harnesses the heat that might otherwise go straight up the flue, I see myself and my wife with a bottle of wine. Same fireplace.

People buy homes because they feel like home and they formulate their choices of showings with basic criteria. Barraging them with information does not build value, it actually destructs the emotion that goes into making a buying decision. Sellers need to understand that. And they also need to get a cup of coffee down the street for showings.

Buyers are waging a war of attrition with sellers in this market to be sure. I recall that when the sellers had the upper hand that buyers had to pretty much deal with their demands or lose the deal. The opposite is now true. At what point, though, does using their leverage cross over into bad faith?

Example: We’ve have a listing under contract with a buyer who poses a challenge. First, this past Spring they were a low ball offer that my seller client did not accept. They lurked, though, with their agent calling me periodically with various Jerry Bresseresque pitches as to why we should sell to them at their price. The house is pretty nice though, and in the Summer we got another offer. Given the reality of losing their chance, they upped their bid and promised a fast closing. To make a very long story short, we went with their offer. The fireworks started once they realized they were ahead of the backup offers.

We do home inspections before lawyers draw contracts in our market, and these buyers used every delay in the book in the inspection and contract process to effectively dry up the backup offers to strengthen their own leverage with us. Intentional? I’d need a crystal ball to truly know. But the upshot is that after a hack home inspection, which took time to debunk erroneous flags of the heat, electric and well water, and various other delays, the backup offers moved on.

Along the way, radon came back as elevated. The buyer wanted $14,000 to remedy well water and air. The proposed November 30 closing was delayed in all the renegotiation, and all the early December talk is now early January because of even more changed stories. Parsing the details would turn this post into a book, but the bottom line is that once the competition for the home was beaten out, the promises made to beat that competition dried up and the buyer manipulated everything available to return as much as they could to their original offer. Their agent is an ineffectual carrier pigeon with no influence over them.

Have you ever been driving behind a slow car, only to have them get inexplicably competitive and accelerate when you try and pass them? If you don’t pass them, they slow down again and if you do pass them they’ll pass you, as if the object is to be ahead of you for its own sake. That’s what this whole transaction feels like.

So was this just business, with the buyer trying to get the best deal they could, or bad faith, where once they “got ahead” intentionally slowed down with no intention of keeping their word?

This much I know: what makes you a good businessperson is not so much how you can skew a deal to your own advantage to the detriment of your partner in commerce, but more how likely  they would do business with you again if the chance arose. That is the acorn of both good karma and repeat business. I wouldn’t do business with these people again, and I wouldn’t hire this agent unless she were completely retrained.

In light of this post by Cathy Tishhouse, I will offer my planned activities today as a small example of why we earn every penny. Yesterday I wrote about a listing I have that is under contract and there was a question as to whether or not it would be wiser to delay the closing and allow the buyers to rent until closing or to escrow money and close sooner. The buyers have made their own decision , which is that if we don’t close in 2008 that they’ll be forced to find another home.

So here’s my day, and bear in mind that there is a foot of new snow in the ground:

8am: arrange for a snow plow to plow driveway at client’s house, as it is no longer occupied.

10am: arrive at Budget Truck rental and personally rent a moving van.

11am: meet my seller at the house listed with me and together, he and I will move his dining room set and snow blower into the garage. Then, we’ll pack the truck with the rest of his belongings.

12 noon: drive client and his belongings back to his house 45 minutes south and unpack.

I will then return the truck and put the snow blower and dining room set on craigslist so they can get them sold ASAP. I will then work in my home office until it is time for bed, taking time to eat and put my own 4 Little Reasons for Working to bed.

Technically, I don’t have to do any of this, but my client is overwhelmed, stressed and busier at work this time of year than any other. He and his wife need a hand. They chose to do business with me. Today I am going to demonstrate why they made the right choice. I am not patting myself on the back. I had no intention of mentioning any of this until I read Cathy’s post. It is my small way of answering the -ahem-gentleman in her post’s notion that our commission is not reflective of our value.

As I commented on Cathy’s blog, we earn every penny.

After a rather arduous marketing effort, I have a listing under contract with a cash buyer who can close at any  time. The cash isn’t his; a generous friend is holding a private mortgage. Even though my seller client bought the house only 2 years ago, we found out that the deck and downstairs bathroom do not have certificates of occupancy. It is only a formality, but those things have to be filed for and provided.

All parties have agreed to escrow funds so that we can close this week and ensure that the compliance issues will be handled. No big deal. Everybody wins this way- the buyers are in for Christmas and have their daughter registered for school before the 1st of the year, and my sellers can finally close the book on two years of owning in a home too far from their jobs.

Of course, my seller’s attorney voiced his opinion that we should not do it that way. He suggested that it would be better to for the buyers to rent the house until the COs are procured, and then close. This is madness. Closing with money in escrow does carry the theoretical risk of losing the escrowed funds, but making my clients unwilling landlords opens them to far worse risks.

First, my clients would be liable for anything that happens while these people are living in the home renting back before closing. What if the house burns down? What if the furnace breaks? What if their small daughter drowns in the large inground pool?

Moreover, delaying the closing in this market is tempting fate. What if the buyer loses his job in this economy and backs out? What if they decide that they don’t like a neighbor, or the sound the refigerator makes? If these people elect not to close for some reason, how do we get them out of the house?

I never met an attorney who likes pre-possession, especially when there are options to prevent it. Yet this lawyer prefers it. I should add that this guy represented them in their purchase 2 years ago and didn’t catch the out of compliance-deck and illegal bathroom. Bad job. Opening the client up to risking losing the sale or having a serious liability problem is also bad advice in my view. My clients agree with me and are going to instruct him to escrow, but I remain disturbed by his questionable counsel.

Am I missing something here?

I have an idea for Uncle Sam to pursue in stimulating the economy. I feel that this idea has not been tried by any administration in the 232-year history of our republic. This policy should be embraced in a bi-partisan manner and should appeal to both free market conservatives and more socially inclined liberals. It’s really quite innovative, if I do say so myself. Here is what I think that the commerce secretary, treasury secretary and all the other big cheeses should implement immediately for the next 90 days:

Shut up.

Just shut up.

D-d-d-d-d! Not another word. Shush. Please. I want to hear crickets chirp in a distant valley.

Now hear me out, Mr. Bernanke, Paulsen and Co. I am in the trenches. I speak with buyers, sellers, borrowers and investors every day. Here’s what I have found out: Every time you stand in front of a microphone you TALK PEOPLE OUT OF ACTING IN THEIR NATURAL TIMEFRAME. Yes. Each statement you make about what you’re going to do to get this economy moving again automatically convinces a huge number of people to wait and see another few months before they act. Wait and see is killing commerce in the housing sector, you dopes.

• “Rates have been lowered for the 50th time to .0000025? I’ll wait and see if they lower them again.” Rates aren’t low enough? Draconian underwriting is hurting borrowers, not high rates!
• “They aren’t buying bad loans with the $700 million after all? I’ll wait and see what they do with the money.” How can people be confident in rescue plans if you don’t keep your word?
• “The government just socialized the banks? I’ll wait and see if that works.” Why was this necessary?
• “Auto executives are going to ride their bikes to Washington next time? I’ll wait and see how that goes.” Why should we pay the bill for 40 years of crappy energy/nonexistent policy?
• “Why should I sell my lis pendens house? Obama will save me!” Puh-lease.

If you screw up a haircut badly enough, you can’t cut your way out. Sometimes you just have to look stupid for two weeks before you can fix it. You just have to grow it out. After you grow it out you can start over.

Get the picture? People aren’t buying houses because they are having babies, getting married, sick of living with their in-laws or other normal reasons because they are so completely freaked by the Jeckyll and Hyde posturing coming out of Washington.  I know these bozo politicians act like they are trying to DO SOMETHING, but their efforts are sabotaging what really needs to happen, which is to have consumers return to the marketplace with a modicum of confidence.  And at this point, with the economy looking like it lost a fight with a blind psychotic barber, everything proposed is making people sit on their hands a little longer at a time when we need them to get off their tushes. 

Let’s just be at peace with looking dumb for a little while, as if we gave ourselves a bad homemade haircut. Maybe the lesson will take this time.

Maybe in your quiet time, Uncle Sam, you can figure out a way for Fannie, Freddie, Madoff, Sub-prime, Lehman Brothers, Meryll Lynch, Bear Stearns, Countrywide, Ameriquest, and the rest, all of which came home to roost within 18 months of each other, to NEVER OCCUR AGAIN. All of us worker drones in the trenches will do the rest. You’ll see.

When our company was based out of our home, someone told me that they could never work from home because they didn’t have the discipline. “You don’t need discipline to work from home,” I replied, “you need bills.” With 4 little ones, bills we have.

Of the four, for the next 30 days two of them will be 4 years old. In 2004, Catherine was born in January, and on December 18, 2004, Gregory came into the world. In spite of his mother’s assertion that it was genetically impossible, he entered with red hair.

Those of who have children know what I’m talking about. I can’t work hard enough. No client is too much. No stage fright or call reluctance will totally stop me from getting out of my comfort zone. No loss mitigator will get me discouraged. Gregory probably won’t appreciate these things until he’s far into adulthood, but I’m not looking for that. Knowing he’s the beneficiary though, does add joy to work that is sometimes not very joyful, especially in this market.

 Happy birthday, Gregory. I hope I can tell your children all about you.

This is a rather strong opinion and I welcome an opposing point of view, but I can’t see losing the argument.

First, a question:

Would you choose a surgeon because he has a yellow Labrador? No? Why not?

Would you invest your money with a stock broker because he wears a cowboy hat? No? Why not?

How about choosing a babysitter- would you entrust your Most Precious to someone because they can’t peel a phone off their ear long enough for someone to snap their photograph?

Surely your criteria for choosing a professional has more substance. However, we have colleagues out there that think that they are going to get lots of business from being the Cat Lady, the 10-Gallon Hat Guy, or the Dude Who is so Busy he Can’t Hang up the Phone Long Enough to Say Cheese.

I know that marketing ourselves is sort of like running for office. And I appreciate that it isn’t easy to stand out from the crowd. But I also know that ours is a profession, and we should comport ourselves with the same dignity as physicians, CPAs or attorneys. Does mean we have to be bland? Of course not, but there is a vast divide between being boring and a cliche cheeseball.

I truly believe that the biggest PR issue the brokerage community has is the public’s difficulty in reconciling our typically amateurish hype with the anecdotal examples of incompetence floating around out there, and cheesy marketing is part of the problem. We are in business, as a matter of fact a real and profitable one when done right, yet we act like we are running for office or auditioning for a reality show. That’s not business-like. If I overhear a guy in a waiting room flip a page and mutter “I would never do business with that idiot” I know he’s reading a real estate magazine. You might think that some people do business with you because your cat is cute or you angle your Blue Tooth in every picture, but I’ll bet that for every deal you think you get because of those things, you are losing far more. And it is my view that you aren’t losing business just for yourself, but that you are making it that much harder for the rest of us.

Two closings scheduled this week. How tough is the market? The one Thursday is a co op purchase that we have been working on since the Summer. It should have closed last month but problems arose between the lender and the co op board that have finally been resolved. Friday’s closing is a short sale that was originally listed in March of 2007. I could write a book on that file alone- deals died, two lenders, severe hardship, and plenty of angst. Nonetheless, a closing is a closing, and the timing is very welcome. Thank you Santa Claus!

Perhaps I am a little jaded by the large number of short sales I am doing, but is anyone living within their means? I run into too many people who put granite counter tops ahead of saving for retirement, or new bathrooms ahead of college funds. When the creek ran high they had no reserves. I think the real issue is that as a society we are addicted to excess. There are no reality cable shows on saving money, just shows on punking up the car, jazzing up the bathrooms, upgrading the kitchen, and buying a dream house, balance sheet be damned.

The same goes for the government. I heard on NPR yesterday that California is in the red for $15 billion in 2008 and is projecting a $27 billion deficit for 2009. They are running out of cash to run the state so severely that they only have a few weeks of available liquidity. My own state of New York has a deficit, and supposedly conservative Kansas of all places is also among dozens of states in the red. The TARP funds that were supposed to purchase toxic mortgage securities are now used for buying stock in banks, bailing out dysfunctional US car companies, and who who knows what else, while we just sit and vote these jerks back in office term after term. This is the hugest bait and switch in the history of free markets. If the government is this irresponsible, and huge companies are this inept, is it any wonder that Ken and Barbie can’t make ends meet either?

I am too busy to storm the Bastille. However, we should all do whatever we can in our own way to buck the trend. I have no bullet point resolutions at this point, save for the fact that my fiscal attitude for 2009 is far more reserved than it was for 2008. Perhaps if everyone is more pragmatic going forward, the recovery will be more solid and built less on fragile Galbraithian feaux commerce.

I cannot speak to the Wall Street side of the matter, but it was bad loans that started the dominoes rolling in the current down cycle we are all working through. I therefore have little confidence in the lenders’ judgment, especially where it concerns working out a short sale. I have done dozens of short sales; very few go smoothly. I have an outstanding attorney deal directly with loss mitigation because he gets his calls returned faster than I can and he has been doing this for over 15 years. At any one time we have about half a dozen short sale workouts in the pipeline.

In my experience, the weak link is the appraisal or BPO. Demonstrating hardship is typically not difficult. Getting an offer is more of a challenge, but we are getting them. Unfortunately, once we get to the appraisal the real challenges arise. Most of the time, the lender inexplicably gets as appraiser from a far away place, sometimes two counties away. Why? We are in the suburbs of New York City, not a remote rural area. There are dozens if not hundreds of appraisers who know the local market. Calling in someone from Long Island or the Catskills (I am not exaggerating) seems ill-advised. So what happens? The appraisal comes in $50,000 higher than the multiple offers we have, and the deal tanks, often putting my seller client in a precarious position.

Bringing in an appraiser from outside the market is a deplorable move. They aren’t more objective, they are simply more unfamiliar. Instead of evaluating what is right before their eyes, they submit a robotic valuation based on raw square footage and what few “comparable” sales recently closed, while ignoring the gigantic unsold inventory which is rotting at their “market value” as well as the significant repairs often needed on the subject property.

The lenders are not doing themselves any favors when they do this. If the workout fails to close, they have a non-performing loan for another 3-9 months, the property falls into more serious disrepair, they incur more legal fees, and the HOUSE SELLS 6-12 MONTHS LATER for $50,000-$100,000 LESS as an REO. Meanwhile, I have wasted my time and my client suffers the humiliation of a foreclosure even though they made a good faith effort to do the right thing.

This is not loss mitigation, it is loss enhancement. Lenders do not seem to grasp that prices are coming down, that we have years of unsold inventory piling up, and 80 cents on the dollar today is better than 60 cents on the dollar in 90 days. By far, the biggest offender is Countrywide. Other lenders are not faultless, however, and I really don’t have a solution. This should be common sense, but anyone who has dealt with some of the drones in loss mitigation know that common sense is not common, it is rare.

Our MLS listing agreements have a clause in them stipulating that no matter who finds the buyer that the listing broker is protected for their commission. There is an additional part stating that all offers must go directly through the broker. For the first time in 13 years I have found someone who cannot grasp this.

Just over 3 months ago I took a listing that was in dire straights: months in arrears, a foreclosure was imminent, and they had only been there a year. Their prior broker, also their attorney, was unsuccessful in selling the place. They had a few limitations on showings which should have been a red flag: nothing before 3:30 (except Wednesdays) & 24 hour notice because of their 2 pit bulls. This is not the way to avoid foreclosure.

As we went along, it became a nightmare. The woman’s 3 live-in GROWN children were USELESS in lending a hand for showings and weekend mornings were sacrosanct because of their precious sleep. We are talking about 20-25 year old adults. 12 out of 13 showing requests were denied. The 13th couldn’t get into some rooms. Get the picture?

Strike one: The client calls me 60 days in to cancel the listing because I am not doing anything to sell the house. I refuse, and tell her I cannot sell what she will not show. We then began a multi-week suspicion-fest where somehow it is my fault this woman’s life is a shambles.

Strike two: conceding that I won’t cancel, I am informed by my dear client that while I have been banging my head for months, she has contacted someone who saw the home prior to her listing with me and that she was selling to them for $100,000 less that the price I am killing myself to push. Would I accept 1/5 of my agreed upon commission since I hadn’t done anything to sell the house? Why should I subsidize her poor judgment and bad decisions?

Strike three: I call her attorney to ask what the hell is going on. He has already sent out contracts. But, being the nice guy he is, I am named as the broker of record…would I accept a smaller commission, though? I faxed him an invoice for my full commission.

Strike four (who said this was baseball?): The listing is now expired and I am called by Oldest Son, he of the locked bedroom and weekend morning beauty sleep, asking me to take the pending listing down so they can re-list with another broker. Now, these have been nightmare clients and jettisoning them is probably smart, but how dumb do I look? How do I know this isn’t just a ruse to get out of paying my fee?

After much acrimony and back and forth, I am finally permitted to contact the buyer. It is true- he won’t be going forward. Why? “That woman was impossible to deal with.”