THE COMPETENT AND THE GRATEFUL

Real estate is an emotional business.  Crazy emotional.  It can be a boom-bust world of big wins, painful losses and lessons learned.  It's a roller coaster, whipsaw, loop-de-loop lifestyle.  And it gets the best of many of us.

Like anyone else who has done this full-time for 22 years, I've ridden the highs and the lows.  

But after two decades, I've mellowed.  I've learned that there's a lot of stuff that happens that is simply beyond my control.  To be sure, those of you who know me know that to the best of my ability, I try to manage every variable that I can.  

But sometimes, people or circumstances can simply lurch in ways that cannot be predicted.  

Often, there's so much emotion wrapped up in a real estate transaction.  Buyers are running up against the end of a lease, sellers are trying to navigate the challenges of moving kids during the school year, lenders are dealing with ridiculous underwriting requirements and appraisers are fearful that one bad appraisal could cost them their livelihood.

Agents worry about all of it.  Trying to keep everyone moving in the same direction is like the proverbial herding of cats.  But how you go about doing it, how you communicate with buyers, sellers, lenders, appraisers, attorneys, underwriters, title closers and everyone else involved in a real estate transaction... makes all the difference.

Real estate agents come with all sorts of emotional profiles... and I've met them all.  You've got the controllers, the bullies, the ego-maniacs and the posers.  You've got the paranoid (everything is bad), the inverse-paranoid (everything is good), and the bi-polar (everything is good... oh wait, everything is bad!).  

But there are two profiles I look for above all else - the competent and the grateful.

Competence speaks for itself.  Competent agents know how to solve problems when they arise, but they also know how to head small issues off before they become larger problems.  They understand the contract, they understand the law, they understand the market and they understand human emotions.  They usually sell a lot of houses, because their services are always in demand.  

This is why I pay so much attention to who the other agent is when offers show up on my listings.  The highest offer is not the best offer if the entire transaction is likely to end up in ditch, upside down with the tires spinning.  

I'm looking for Proven Results (which happens to be the name of this blog).  I'm looking for agents who know what they are doing, because guess what... good agents usually have educated, qualified, reasonable clients.  

But there's another component to surviving this crazy business, and all too often I find it overlooked or missing entirely.  It's gratitude, the simple realization that we are blessed to have the privilege to help people through this process with the opportunity to earn a good living along the way.

When I work with buyers, I take my responsibility to advocate for them very seriously.  But at the same time, I remember that (under most circumstances) it's the seller who is paying the bulk of my commission.

Thus, whenever I have dialog with the other side of a transaction, it's always from a position of respect with a focus on solutions.  

Seek and destroy negotiations are for losers.  Zero sum games suck.  Take-it-or-leave-it strategies should only be used as a last, final resort in the most dire of circumstances.

I don't want to hang out with people who build themselves up by tearing others down.    

It's critically important that you surround yourself with people you actually want to be around.  If you don't like the vibe you are getting from your clients, you should not be working with them.

Often, "no" is the most empowering word in the English language.  

I'm going to continue to sell a lot of houses.  I'm going to approach this business with firmness, seriousness, competence and respect.  And I'm also going to be grateful and I'm going to express that gratitude every chance I get.  

Most people respond well to gratitude.  It's disarming.  It builds trust.  It takes and shows confidence to express it.  I'm grateful for the other agents, the hardworking lenders, and the clients on the other side of the deal.  

That doesn't mean every transaction goes smoothly.  But I'm not consciously going to give other people the power to determine how I feel.  Gratitude will be my weapon of choice, and I will use it whenever possible to make people feel like they are meaningful, heard and respected.    

DODD-FRANK AND $1,000 APPRAISALS

If you're buying, selling or refinancing a home these days, chances are you're hearing a lot of complaining about appraisals.

The cost, the turnaround the times, the difficulty of even finding an appraiser to take the assignment... sometimes it feels like the whole world of appraisals has turned into a bureaucratic, over-regulated cesspool.

In fact, for the first time, I just had a client pay $1,000 for a rush order appraisal, which basically meant getting it turned around in 14 days.  

But before you complain to me (or your lender) about the soaring cost and uncertain response times of appraisers, it's worth a few minutes to explain why this is happening.

Long story short, after the subprime financing meltdown and Great Recession of 2008-2009, government regulators began doing an autopsy on the housing market collapse and much of the blame, rightly or wrongly, was ultimately dropped at the feet of the appraisal industry.

Too many incestuous relationships between independent contractor appraisers and value-dependent subprime loan originators, weak licensing standards and a lack of regulatory oversight were cited as primary reasons so many bad loans were made during this toxic era.

Agreed.

In fact, one of the main reasons I picked up and left California at the end of 2005 was the unhealthy and unsustainable practices of the mortgage finance industry.  

In much of Southern California, where I lived, home prices had doubled inside of seven years... not necessarily because of economic conditions or a massive migration of new residents who could afford $700,000 starter homes... but because in the subprime era, people could buy homes not based on qualification, but simply desire.

Hence, the market flooded with low quality, over-extended buyers.  Values surged.  The bubble inflated.  I lost faith in the market.  And then I sold my house and moved to Colorado.

But I digress.  

In the aftermath of the mortgage meltdown, the Consumer Finance Protection Bureau (CFPB) was born and became federal law in July of 2010.  Often referred to as "Dodd-Frank" (named after the architects of the new bureaucracy, who also signed off on virtually all of the polices which led to the subprime meltdown... but again, I digress), the new agency created sweeping new regulations for the mortgage, appraisal and finance industries.

Among the key provisions... 

1) Appraisers valuing homes with loans that would be sold to Fannie Mae or Freddie Mac (more than 80% of all mortgages are sold to Fannie/Freddie) would need to give up their independent contractor status and become employees of Appraisal Management Companies, a new entity that would pool appraisers together and make random appraisal assignments to avoid conflicts of interest between individual appraisers and mortgage companies and originators.

2) Appraisal Management Companies would be allowed to mark up the cost of appraisals to cover their administrative, licensing and management fees.

3) Licensed Appraisers would now be required to have at least an Associate's Degree (AA) and Certified Residential Appraisers would require at least a Bachelor's Degree (BA) in order to keep their licenses.

In addition, continuing education requirements increased and a new disciplinary process was put in place that would ensure appraisers who overvalued homes would face reprimand, suspension or revocation of their licenses.

So, six years later, here's what you have.  

In some states, as many as half of the licensed appraisers have quit or been regulated out of the business.

Appraisal Management Companies now add as much as 40% to the cost of an appraisal for "administrative, licensing and management" fees.

Individual appraisers routinely turn down assignments for any property that isn't a "slam dunk" on value for fear of having their work audited.

And many of the most experienced, most competent appraisers have opted out of the mortgage finance chain to preserve their independent contractor status.  These appraisers now focus on doing work for private lenders, divorce and estate attorneys, and others with appraisal needs that don't funnel into the Fannie/Freddie pipeline.

The bottom line is that an appraisal which may have cost $400 five years ago will cost $750 to $1,000 to obtain today.  And instead of getting an appraisal in a week, it could take a month to see a finished report.

I'm not telling you if it's good or bad... I'm just telling you why it is.  You can draw your own conclusions.  

"Reforming" anything always comes with unintended consequences.  It's debatable whether you are getting a better, more accurate appraisal than before Dodd-Frank.  But it certainly is going to cost you more, and it's going to take a lot longer to arrive.