Buyers ask, "Should I buy?" - Sellers ask, "Should I sell?

September 12th 2007
By "G-II" Varrato II, Realtor®, Retired USAF Red Horse 820th CESePRO 500, ABR, RECS, Mentor
Coldwell Banker Residential Brokerage

We have all been tracking the increasingly frustrating real estate market. As Real Estate Practitioners for nearly two decades, we can tell you that this is, by far, the most frustrating of all of the down-trend scenarios we have experienced. The boom years, the period of time I refer to as "the nutty period", 2003 to 2005... came to an abrupt halt around July/August 2005. Lori and I have been through this type of down-turn in market conditions two times in prior years. We have abundant experience in dealing with these types of market conditions. The real estate industry is a cyclical animal. By that I mean, values go up and values go down; prices go up and prices go down and interest rates go up and interest rates go down. This is the nature of the beast. That said, the sharp course change from the upward out-of-control spiral to the nose dive... plummeting toward the center of the earth, we have all endured... is the fastest reverse direction we have ever seen.

In today's real estate market, when REALTORS® search the MLS system here in the Valley, we find over 60,000 homes available for sale on any given day. For buyers in today's market, they have the pick of the litter. Buyers are taking their time to make a decision. They are in no hurry to pull the trigger.

Unfortunately, for sellers, this is a frustration that is almost unbearable. Sellers are feeling the degradation of their property value. However, industry analysts, suggest that what is truly taking place not actually value degradation, but rather a correction of real estate values back to a point of sanity. Many of us have listened to the following scenario from friends or sellers in today's market; "My neighbor sold his home in 2005 for $325,000 and today I can't get $250,000 for my house." This story plays over and over again from community to community and from price point to price point.

Real estate market industry analysis's predict that the market price/value index could soften yet another 5% or more over the next 12 months. If this is true, buyers who are in the market for a home should begin their search within this time frame. Buying at the bottom of the market is always the a logical time to make a purchase; and the bottom of the market only shows its head about every seven to ten years. That is the approximate life span of an upward cycle trend in the real estate market. Remember, what goes up, will always come down and what comes down will ALWAYS go up.

Sellers who are selling in a down-trending real estate market should consider if they truly need to sell. If they do not, then they should get out of the market until the dust settles. However, if the seller is in a MUST SELL mode, then the seller will also have to embrace the reality of the market conditions. The seller will have to realize that he/she/they are not going to get prices that paralleled that of their friends a few months or a few years back. Seller's should however be able to get top dollar for their property. Top dollar does not necessarily mean that he/she/they will score a home run like their friends and neighbors a few months/years ago, but it does mean that, properly represented, the seller should be able to squeeze every dollar available... out of their home... that the market will support.

In today's real estate market, here in the Valley Of The Sun a.k.a. the ARMLS (Arizona Regional Multiple Listing Service) area we have over 60,000 homes for sale, including those that are in the pending category. About 63,000 licensees practice their real estate craft in this area. The ARMLS area hosts about 4,000,000 people, covering an area of about 213,700 square miles. In this entire area, in the month of August 2007 only 3,930 home sales contracts closed. In the first ten days of September 2007 in the same geographic demographic area, only 470 single family residential home sales contracts closed. So you see, if you are a seller in today's market and there is no overwhelming compelling reason you are selling now, DON'T! Take your home off the market and let the market conditions finish their adjustment process. If you must stay in this real estate market then it is this REALTORS® opinion that you may be best served by a REALTOR® who has been in this industry over 10 years. REALTORS® with this type of experience have weathered this "Perfect Storm" before. An experienced, well trained, seasoned real estate practitioner will know how to help you skipper your transaction through the storm of low-ball offers and unqualified buyers who come to the party with loan officers who have no clue of how to qualify a buyer for a loan.

If you're a buyer in today's market, BUY NOW! The FED is expected to suggest a relaxing of interest rates when the FED speaks on Capital Hill on September 18th 2007. If this occurs, and you are a buyer, get off your couch and get yourself a qualified, experienced, tenured, REALTOR® and buy NOW! It is this REALTORS® opinion that REALTORS® who have been in the business over 10 years are best suited to help you through the buying process. Experienced REALTORS®, or at the very least, REALTORS® who are being mentored by experienced, well seasoned REALTORS®, will help you process the intricate nuances of purchasing your home. Let's face it; you are not buying a head of cabbage. You are going to allocate time, energy, emotion and money into, perhaps the single most expensive investment of your life time. Do you really want to be tromping around this swamp with an inexperienced guide? Confucius say: "Man who foolishly embarks on a journey without a guide, is soon lost and bewildered."

Be wise! Be certain of your mission! Be diligent in who you select to represent your interests! It's a jungle out there and you don't want to end up shark chum for the buyer if you're a seller or for the seller if you're a buyer.

If you or any one you know is in search for a couple of experienced REALTORS®, be sure to point them in our direction. Lori and I have been teaching and mentoring new agents for Coldwell Banker Residential Brokerage for nearly two decades. We have been involved with processing thousands of transactions in that time. Check out A Report Card for Lori & G-II.

We can be reached by cell phone at: (602) 574-5674 for Lori or (602) 796-5674 for G-II and of course you can text us at LorisPDA@HomesInPhoenix.net or G-IIsPDA@HomesInPhoenix.net.

Why Won't My House Sell?

We often field eMail questions and/or phone calls from sellers, asking... Why won't my house sell? The information below might help explain the real estate market dynamic we are currently experiancing.

A SELLER WROTE: "...Hi my husband and I are trying to sell our home. We are selling a one story 1681 sqr ft. We are currently asking 215.000. We have had it on the market for a very long time and want something to happen. I am just wondering how you feel about the market and our situation..."

There are several factors affecting the traffic you have experienced to date, not the least of which is the sliding real estate market. It is no secret to anyone today that the real estate market hit its peak around mid-2005. It was at that point, around July/August 2005, that the market began its rapid readjustment. This had to happen. Real estate prices had raced ahead of their time by about 10 years.

For example, if you purchased your home in early to mid 2004, residential resale inventory in the ARMLS region (all
of Maricopa County and a small portion of Pima County, an area that services just under 5 million people - according to the 2005 Census) had just begun to recede from about 30,000 units available for sale, a historic
high set in February 2003, to about 22,900. Builders were holding lotteries for lots and long lines were forming in the scorching desert sun populated by anyone who wanted a piece of the American Dream, homeownership. The
party was just getting started. Residential sales inched their way upward... 8,900 units in April, 9,000 units in May and upward to 10,000 units in June. And as is typical when the holiday seasons begin, sales began to slow... down to 9,000 units in July, 8,900 units in August, 8,600 units in September, settling out at just over 6,600 units in January 2005.

Inventory continued to shrink. The roller coaster ride down the steep hill continued throughout 2004 and into March of 2005 when inventory hit an historic low of only 3,500 units. Immediately, the party was over. The period of readjustment had begun. It was as if we were riding a Japanese Bullet Train and someone pulled on the emergency break and our necks snapped from the whiplash of the sudden jolt!

In less than 30 days, the period of time from March 2005 to April 2005, inventory had tripled from an historic low of 3,500 units... up to just under 10,000 units. Inventory continued to climb and by August 2005, inventory had reached 15,000 units. The climb in inventory continued, now at an almost exponential pace making leaps of 3,000 to 5,000 units per month. By January 2006, residential inventory had reached all time record high of just over 31,000 units. The adjustment continued, well into the year each month ringing the bell for a new all time inventory high. In September 2006 residential inventory made yet another record, hitting the mark at 48,443 units. Recorded sales were declining steadily and in September 2005 were down to just over 9,000 units, but the writing was on the wall, the number of buyers no longer outweighed the number of sellers. In fact sellers were out gunned 4 to 1. This was the beginning of the growing time on market, gradual that it was.

In April 2007, residential inventory hit another milestone, toping 52,500 units. Adding to the seller's frustration was the reality that only 11% of the homes on the market sold in April 2007, leaving over 47,000 homes unsold.

Compound the market dynamic of the residential resale competition with the incredible incentives, being offered by Builders. According to the Ultimate New Homes web site http://www.ultimatenewhomes.com (Proprietary Realtor Web Site), by October 2005, Builders were already feeling the pinch. Builders began to inch up the compensation to the Buyer Agents. Buyer incentive packages began to work their way back on to the scene. By January of 2006 builder spec inventory had begun to grow out of control. Toward the end of 2005 about 58% of the builders were offering Buyer brokers more than 3% commissions. By January 2006 86% of the builders were now offering MORE
than 3% commissions. Today, we receive eMails from builders on a daily basis, offering to pay Realtors commissions of 4%, 7%, 10% and even as high at 15%, if the Realtor will sell their residential resale buyer a new
construction home. By April 2006 the builder spec home inventory had eclipsed the 2,400 units record set in May 2003 and had now skyrocketed to more than 4,100 units. That was an off the chart increase of over 1,700
units from the opening month of January 2006. The tables had turned. The builders had boxed themselves in and now they were going to have to peddle fast to undo the damage their greed had caused.

CLICK THIS LINK to view just a few builder incentives and buyer broker commission packages.

These are conditions sellers can do nothing about. The seller's home is located where it is. The seller can't change
that. The seller's home is so many square feet in size. The seller can't change that. The seller's home is usually kept in good condition and that is something sellers can control, although I'll bet that most seller's homes are kept neat to the 10s.

THE SELLER CLOSED WITH: "...We currently have a realtor but he is a friend and is not aggressive. We would want to switch if we thought it would help our situation. Please let me know what you think..."

There are several things that can be controlled by the listing agent, however. Generally, as we review homes in the MLS system and on Realtor.com, the world’s most searched real estate search engine, we find that many home's presence is not optimized. Let me explain.

First, we are Internet Realtors, or eRealtors. There are only about 1/2 of 1 percent of the entire population of the National Association of Realtors membership who can make this claim. eRealtors generate 100% of their business from their web presence and from the use and deployment of technological tools. Therefore what we tell you in the following paragraphs is fact, not fiction.

Many homes, marketed by real estate agents today, do not always deploy all of the technical tools available to our industry that will help maximize the visibility of the property on the Internet. Because of the lack of use of these
technologies, most homes will not even register as a blip on the radar screen when folks search Realtor.com. That is because the home is not optimized. At Realtor.com, properties are delivered to the visitor’s search results in the
following hierarchy. At the top of the list are homes that are hosted on a Realtor.com "Enhanced Web Page". The Realtor.com web page must sponsor a Head Line, a Scrolling Banner in a Virtual Tour, no less than 6 photos and
use the 2,500 characters of space provided for additional comments about the property. Homes that have less than these components are almost never seen by visitors to Realtor.com. The Realtor.com search algorithm simply pays no attention to properties that are, bland, in description and enhancements.

This is an example of a property that is "Optimized" at Realtor.com.

CLICK THIS TINYURL link to view one of our listings on Realtor.com

Check out some other properties on Realtor.com. If you were looking at the property displayed in the link above and one of the other properties you have found for our demonstration purposes, at Realtor.com, side by side, which one would you find more interesting? Which property would you spend more time reviewing? Which property do you think would prompt you to contact the agent to gather more information?

Additionally, and equally important is the ability for the consumer to make immediate contact with a live person. At Realtor.com, and on all of our web sites, we deploy a button or link that allows the consumer to do just that.
CLICK THIS LINK to see how fast you can reach us. This consumer contact technology is proprietary to Coldwell Banker agents. Once the consumer completes the form, the prospect information is immediately delivered, right to the listing agent's PDA or cell phone. If the consumer offered up a phone number in the contact information section of the form, the Coldwell Banker agent will call the prospect back within two or three minutes. At the very least, the
prospect's eMail address has been sent to the Coldwell Banker agent for follow up. Now... if a prospect really wants to make "First Contact", he/she can CLICK THIS LINK and be immediately connected directly to our cell phones. This technology is not part of the Coldwell Banker arsenal of tech-tools. This is something that Lori & G-II deploy as part of our marketing strategy.

We mentioned above, the Realtor.com Enhanced Web Page; the Enhanced Web Pages are not inexpensive. The system costs the agent upward of $700 annually. A Virtual Tour can cost the agent anywhere between $60 and $100 or more per Virtual Tour. It also costs an agent an additional $25 to post the Virtual Tour to Realtor.com. Making the commitment to a seller, to expose their property with the most aggressive use of tech-tools offered to the real estate community is not inexpensive. Nearly every real estate agent on the planet has a web site; that's not rocket science. Knowing how to create interest in the agent's web site, knowing how to position the agent's web site on the first page of the major search engines... now... that's exposure to the public.

If a home has only one photo shown in the MLS system, this could be very unhelpful, in terms of aggressive marketing. We often see homes that have languished on the market for 120 days, 180 days, 240 days, 360 days and more. This also translates to why the home will rank poorly in the Realtor.com search algorithm. Without a Virtual Tour and 6 photos, any home might as well be invisible to the public at Realtor.com.

Web presence is another critical factor in "Optimization". Type any agent’s name into any web browser, search window, and see if you can find him/her on the first page of the search engine. Now type Lori Klindera or type Lori & G-II into any search engine's search window. See if you can find any of our 13 web sites in the first page. I'll wager that we take up the top quarter to top half of most of the major search engines.

It is also extremely important for the real estate agent's web site to be "organically optimized" so that the web site registers high in the search results for key words, targeted by the agent. For this example, type the following (coldwell banker phoneix or coldwell banker goodyear) into Yahoo.com, Google.com, MSN.com, WebCrawler.com, AltaVista.com, Excite.com or Ask.com and notice the search results. Look for any of our webs such as
www.realestateinphoenix.net, www.homesinphoenix.net, www.iphoenixmls.com, www.airforcehomebuyer.info,
www.airforcehomeseller.com or any other webs or cross webs that we might be linked to. Try typing this, air force home buyer, into YaHoo.com, AltaVista.com, Excite.com, MSN.com or Ask.com and see if you can find
www.airforcehomebuyer.com, www.airforcehomebuyer.info, www.airforcehomeseller.com, or www.airforcehomeseller.info.

However simply ranking high on the search engine ladder is not the end all to web presence. The web visitor has to be able to make contact with the agent and... even more critical, the agent has to be ready, willing and able to respond immediately to the consumers requests. That is something we excel at.

Of course, pricing a home is very important too. Homes priced a little above sold homes, similar to their home, in their neck of the woods may not always be the most appropriate strategy. However, simply reducing the price is not the end all to getting it shown, but it is a good start. All of the components above are still needed if the seller is to have a fighting chance of selling his/her home in any reasonable length of time. Oh yes, in today's real estate world, the average time on market in the ARMLS region hovers between 4 and 5 months.

Now something to consider; if the seller has over leveraged his/her home, that is, if the seller has refinanced the
home and owes too much on his/her home... it may not be a good time for him/her to sell the home at this time. Remember, sellers often need to replace the home they are selling with another one. Today's financing arena is quite different than it was in the early part of 2007 and it is projected to become, possibly, more challenging for buyers.

One last note about today's real estate agents. It is our opinion, after being in this industry nearly two decades, that many of today's agents have never been through a real estate market like we are experiencing. This is our third time through a down trend like this. Agents who have less than 10 years’ experience have never seen this type of market. Many of them may not know how to manage their time, their financial resources or their clients’ anxieties. They simply don't have the experience. They have never been in this kind of fire fight. It is expensive to market homes in today's real estate market environment. It is extremely time consuming and... holding open houses, plopping a for sale sign in the yard and tossing the listing into the MLS simply will not get the job done.

Everything sells, eventually. The seller's home may not sell tomorrow, but it will sell. If the seller is not in a "I Gotta Sell This House NOW Mode" then he/she should simply relax. There is no pressure him/her. There is no fire to evade. There is no speeding truck to jump out of the way of and there is no falling sky. However, and while everything sells, the efforts put forth to make that period of time as short as possible is all in the marketing. Today, EVERY seller's home is one of 52,500 homes for sale. The seller's home is like a pea in a box of marbles. It will never been scene if it is not marketed with every ounce of technology available today.

If you find yourself in need of a marketing specialist, and not just another Realtor, we're happy to chat with you, any time…simply call Lori at 602-574-5674.

Bye for now... we hope this information is helpful!

Builders and New Construction - Why Are Realtors Needed?

By G-II Varrato II
Coldwell Banker Residential Brokerage
Phoenix, Arizona


I’m often asked by new agents, “Why do buyers even need a real estate agent if the builder isn’t going to negotiate their contract?”

The answer is somewhat complex and yet, equally, quite simple really. Buyers, for the most part, will truly understand very little of the massive amount of paper they are going to review, agree to and sign. My comment is, by no means, intended to impugn the integrity of the builder or their site sales staff. By and large, the builder community is populated with very wise and reputable real estate licensees. However, all too often unrepresented buyers are presented with documents for review and subsequent acceptance that they really do not fully understand. And… more to the point, our inherent nature, as humans, often will let our pride get in the way of asking for more detailed and clear explanations of what we are reading. We simply don’t want to sound dumb.

Understanding the loan process can add additional challenges for the buyer. Buyers are often given a crash course in industry jargon. GFE, LTV, APR, TIL, 1003, HUD-1 and the list goes on. By the time the buyer has made it through the loan package, the mounds of paper and jargon has stunned many to the point that they are much like the deer, standing in the street, looking at the oncoming truck with that “Deer In The Headlight” look.

The simple truth of the matter is that we, as industry experts, are needed to help guide the buyer through that swamp of inked up manufactured pulp. And while we are not expected to have the understanding or knowledge of inspectors, landscapers, lawyers, roofing contractors or any number of hats that buyers want to toss on our heads, we do have an obligation to offer our expert opinion of what all those words on all that paper really means. And… if we don’t know the answer, we had better be able to direct our clients to the appropriate resource for the answers they crave.

We have an obligation to be able to understand the content of the Commissioners Public Report (CPR) and point out items within the report of particular importance. All too often buyers either simply gloss over the CPR or even worse, don’t even read it, subsequently signing the document only to learn later that the content of the CPR or the CC&Rs contained information that they would have found objectionable had they known the exact content before they closed on their new home.

A case in point follows: A buyer purchased a home in a community that met all of the requirements set forth by state statute, in terms of disclosures and content within the CPR. Several months after the buyers had closed on their home, the buyers found their house developing cracks in nearly every wall in nearly every direction, inside, outside and across the ceiling. The builder was called to the property and has paid regular visits to the property for the past three years to make repairs to the home. (By the way, this subdivision may be involved in a law suite in the not too distant future).

The buyers made their purchase, (the couple was not represented by a real estate agent), signed all of the disclosures required under state law and statute, conducted their inspections and closed on the property. What they did not realize was that the CPR contained a potential red flag, a notice of potential risk, for homes built in this particular subdivision. The CPR contained words such as earth fissures, ground subsidence, and a line that read “…This risk of this earth fissure to Unit 2A… …is very low.” Oh yes, the parcel the buyer’s house is located on is in Unit 2A.

If the buyers had been represented by a competent real estate agent, these disclosures would have been pointed out to the buyer and… again under the tutelage of the competent real estate agent… the buyer would have been directed to the appropriate resources for further explanation of this information. The buyer would then have been able to make, not only a decision based on the required disclosures, but also would have had the opportunity to make a decision to move forward, or not, with their purchase based on a more knowledgeable understanding of the potential risk in owning a home in Unit 2A.

Again, it is important to point out that it does not appear that the builder or their employees have conducted themselves in any inappropriate manner. My point however is that, in this instance with this buyer, the buyer might have decided against the dice roll when making this purchase if they had fully understood that their purchase was, in fact, a dice roll with regard to the soil stability.

Beyond the scope of being, “really GREAT transaction guides” is our ability to offer competent council in terms of the loan platforms being digested by the buyer.

Another case in point: One of our buyers made a purchase from a particular builder who, at the time, offered a certain amount of money in the way of a purchasing incentive. As usual, the incentive was tied to a requirement that the buyer use the builder’s preferred lender if the buyer wanted to take advantage of the generous incentive. The builder also had designated what title company would close the transaction.

About three weeks prior to closing day, the buyer received the Good Faith Estimate (GFE) and, after reviewing the document, felt that the figures were fair but, just to be certain of their assumption, forwarded the GFE to us, their Realtor®, for review. The buyer’s profiled loan was set up as an 80% first loan with a 20% second loan. The buyer also shared their FICO score, well over 780, with us.

After reviewing the GFE, we counseled with the buyer and advised them that we felt the proposed closing costs were high by about $1,000 to $1,200 both in terms of escrow fees and lender origination fees. Our clients agreed to allow us to speak with the escrow company and with the lender about the fee structure. At the conclusion of our conversation with each entity, the total closing costs had been reduced over $1,100.

Our next call was to the builder. The builder had recently increased the buyer incentive package from what our client was offered, when we went to contract several months earlier, to a considerably larger incentive package offered to today's buyers. We placed a call to the builder, and after several conversations with the builder, we successfully negotiated an increase of the incentive package for our client that was exactly equal to that being offered to today's buyers. This scenario is a prime example of the negotiating power a professional Realtor brings to the transaction. Remember, negotiating is not all about getting the lowest price, negotiating is involved in every facet of a transaction, including helping the buyer negotiate title fees, loan costs and, in this case, an increase of $5,000 to our client's incentive package.

The bottom line is just this folks. Realtors® know how to read contracts. We know how to read Good Faith Estimates (GFE’s). We know what all those really weird words are and what they all mean, and if we don’t, we know how to get the answers. Most consumers do not have these skills! They need us and we owe it to them to truly represent them when they make their purchase of new construction.

What buyers don’t need is to be car-pooled to a builder’s showroom by a real estate agent who acts as nothing more than a door man/woman only to leave after the buyer walks through the door way and then return for his/her commission check when the new home closes escrow. Such actions are not indicative of buyer representation. Such actions should be unthinkable by any real estate professional.

If you would like to know more about Buyer Representation please drop us a post at Lori.and.G-II@RealEstateInPhoenix.net.

Here are a few useful links for Buyers and Realtors alike:

CLICK THIS LINK to read some Really Scary Inspection Stories
CLICK THIS LINK to read, What Builders Hope Buyers Never Learn
CLICK THIS LINK to download a copy of the Arizona Registrar of Contractors Workmanship Handbook

Dual Agency, Practical or Impractical & What The Heck Is It, Anyway?

Dual Agency, Practical or Impractical

&

What The Heck Is It, Anyway?

A lot has been written and debated about the subject of Dual Agency. So, what the heck is the big deal?

Let's break it down. The assumption is that most people are aware that a real estate broker or salesperson ("Broker") is an agent with fiduciary duties to the party that the Broker represents. The reality and the problem is that most people do not know this. Now... most real estate agents should know this but unfortunately, many do not. You see,
an "agency relationship" is most often created by express agreement, I.E. a listing agreement and/or a buyer broker agreement. Normally, both documents clearly outline the fiduciary relationship and duties of the real estate agent. However, an agency relationship can be legally implied by the parties' "agent's" actions. Regardless of whether the agency relationship is express or implied, the agency relationship imposes on a Broker the fiduciary duties of loyalty, obedience, disclosure, confidentiality, and accounting.

In King County, Washington State, in Busk v. Hoard, 396 P.2d 171 (1964 Wash. 1964)., the King County Supreme Court held that: "...The concept of agency is one of law. Its existence depends upon factual elements that enable a
determination, as to whether an agency relationship existed, to be made from all the peculiar circumstances of the particular case. No one fact, seized from its setting, should be regarded as conclusive or controlling under any
and all circumstances..."

So, what is "fiduciary duty"? First let's define what the Realtor's Code of Ethics says of Fiduciary Duty.

• Standard of Practice 11-2

The obligations of the Code of Ethics in respect of real estate disciplines other than appraisal shall be interpreted and applied in accordance with the standards of competence and practice which clients and the public reasonably require to protect their rights and interests considering the complexity of the transaction, the availability of expert assistance, and, where the REALTOR® is an agent or subagent, the obligations of a fiduciary. (Adopted 1/95)

Ok... so what the heck does that all mean? For me, perhaps the best definition of "fiduciary" was found on the Internet at www.websiteupgrades.ca/glossary/free/F.shtml:

Here Fiduciary is defined as:

"A person charged by law and equity with a higher duty of care for another person. A person who, as a result of a relationship with another person, is required by law to place the other person's interests equal to or ahead of his own in all dealings involving that other person. The relationship is often created when the other person approaches the fiduciary to use the fiduciary's special skills and knowledge, for a fee, to benefit the other person."

I think this definition best describes what we do as Realtors and/or real estate agents. We either represent the best interests of a client, buyer or seller or we take some subservient roll. By subservient roll, I do not mean to imply that our services are any less valuable, only that our services take on a different face.

Consider the agent acting as an advocate/fiduciary for a buyer or seller. For our example, we'll assume that our real estate agent is involved with a buyer who wishes to purchase a particular piece of real estate listed by the agent's brokerage, we'll call them Dual Agency Inc. The agent will, first discuss with the seller, that the potential for an offer from a buyer who has been working with the agent in search of a piece of real estate to purchase. Not until the seller agrees to the potential of limited disclosed dual agency, should the agent present the offer to the seller and not until the buyer has agreed to the potential of limited disclosed dual agency, should the agent prepare the offer for the buyer.

It is also extremely important to remember that, here in Arizona, we are blessed... or cursed... with the privilege and responsibility of being able to write contract language to a transaction. Arizona is the ONLY state in the US that empowers licensed real estate agents with this component within the real estate transaction. This right is entrusted under Article 26 of the Arizona Constitution wherein Article 26 reads:

"1. Powers of real estate broker or salesman

Section 1. Any person holding a valid license as a real estate broker or a real estate salesman regularly issued by the Arizona State Real Estate Department when acting in such capacity as broker or salesman for the parties, or agent for one of the parties to a sale, exchange, or trade, or the renting and leasing of property, shall have the right to draft or fill out and complete, without charge, any and all instruments incident thereto including, but not limited to, preliminary purchase agreements and earnest money receipts, deeds, mortgages, leases, assignments, releases, contracts for sale of realty, and bills of sale."

Ok, so why is this important? Because Article 26 sets the foundation for how real estate agents engage the public.
We have an inherent duty to understand our craft. If we engage a consumer in a transaction, we have an obligation to lay out all of the nuances of the transaction, all of the nuances and peculiarities of each document that becomes an integrated part of the transaction. Our duty is not only to help negotiate the transaction, but more importantly, our
duty is to help the consumer fully understand their duties to the transaction.

Too many folks, real estate agents and the public, place way too much emphasis on the negotiations of a transaction rather than the complexities of the transaction. Any monkey on a chain can fill in a contract form, it's not rocket science. And, while we, as an industry are heralded as learned negotiators, we are all too often dismissed for our knowledge of the intricacies of keeping a transaction together. It is this Realtor's opinion that we are not paid the big
bucks for our slight of tongue or negotiating strategy; we are, or should be, paid the big bucks for making sure that the transaction makes it to the finish line. We are entrusted with an overwhelming responsibility to fully understand and explain the meaning of the contract, the meaning of each form to the contract, the ins-and-outs of surveys, disclosure of waste water treatment requirements, the ability to dissect the potential pot-holes in a transaction and how to navigate around or through them and to explain the particular responsibility of each party to the transaction. We have an obligation to the parties to help them complete the transaction with as little inconvenience as possible. The particulars of who "gets the best deal", buyer or seller, is an arguable point if the transaction never closes!

In no way is Dual Agency an obstacle to these duties! Just because one party or the other loses the edge of gaining
an advantage of 'covert knowledge gained' about the other side, has little bearing on the real estate agent's responsibility to deal fairly and honestly with both the buyer and seller in a Dual Agency transaction or any
transaction!

Article 26 of the Arizona Constitution places Arizona Real Estate Professionals on a playing field that is far more
different than any real estate agent in any other part of the United States. Moreover an excerpt from the AAR-On-Line publication March 2006 written by Michelle Lind, General Council to the Arizona Association of Realtors read:

How Article 26 Affects a Licensee's Legal Obligations

Few court cases have interpreted the provisions of Article 26. However, in Morely v. J. Pagel Realty & Insurance,
27 Ariz. App. 62, 550 P.2d 1104 (1976), the Court of Appeals states:

Having achieved, by virtue of [Article 26 Section 1 of the Arizona Constitution], the right to prepare any and all instruments incident to the sale of real property, including promissory notes, real estate brokers and salesmen also bear the responsibility and duty of explaining to the persons involved the implications of these documents. Failure to do so may constitute real estate malpractice.

Id. at 66. In a subsequent case, Olson v. Neale, 116 Ariz. 522, 570 P.2d 209 (App. 1977), the court states:

[A]rticle 26 § 1 of the Arizona constitution . . . authorizes brokers and salesmen to engage in limited law practice involving real property transactions. If a broker can practice law in the area of real property
sales, it is reasonable to hold him to a full understanding of the implications and ramifications
of the Statute of Frauds.

Id. at 525.
These cases, and subsequent clarifications by the Arizona courts, indicate that Article 26 imposes a duty upon brokers and salespersons to give competent advice to their clients and to understand the legal implications of the documents they prepare.

So, where does this all lead with respect to Dual Agency? In this Realtor's opinion, simply stated, as an industry we have an obligation to be fair and honest with the public, the consumers of our services. We have a duty to be honest and upfront about how Agency Relationship works and what it means. There are numerous instances of case law, in Arizona and around the US that tell of tales of dubious dealings by agents, knowingly and unknowingly, mismanaging the public's expectations of these relationships. This is not a bi-product of Dual Agency, this is a bi-product of inexperience and incompetence by real estate practitioners who do not take the necessary steps to fully explain the fine distinction between advocacy and fiduciary VS fair and honest dealings with the public.

If we, as an industry, take a more responsible roll in explaining Dual Agency Representation VS Single Agency
Representation, we will find that there will be many fewer complaints filed with the Arizona Department of Real Estate over this subject.

Yes, there are advantages for a buyer or seller to be represented by an exclusive agency relationship. For example,
the ability to take advantage of misguided disclosure of the motivations by one side or the other can be valuable during the initial negotiations and throughout the transaction. But... if the buyer or seller has been properly schooled by his/her real estate agent, there is little chance of either side ever coming across such, foolishly disclosed, information.

Lori Klindera and "G-II" Varrato II are Realtors with Coldwell Banker Residential Brokerage, 3050 W. Agua Fria Freeway, Suite 110, Phoenix, AZ. 85027. We can be reached at cell phones 602-574-5674 for Lori, 602-796-5674
for G-II or by eMail at any number of eMail addresses, such as Lori.and.G-II@RealEstateInPhoenix.net or
Lori.G-II@AirForceHomeSeller.com.

Bye till next time. Lori and I truly wish you and your family a Happy, Healthy, Safe, and Prosperous 2007!

This article has been written by
"G-II". All rights reserved

Builder Contracts, Be AWARE Of What You're Signing!

Builder Contracts, Be AWARE Of What You're Signing!

By "G-II" Varrato II,
Realtor®, Retired USAF Red Horse 820th CES
ePRO 500, ABR, RECS, Mentor
Coldwell Banker Residential Brokerage

Builder contracts come in all sizes, shapes and versions. There is little opportunity for the alteration of any of the terms of a Builder’s Contract. However, that said, it is imperative that you fully understand what you are signing. Even if you have made several purchases of residential real estate in the past, unless you are specifically trained in the art of understanding contract language, this is not a swamp you should venture into without a seasoned real estate professional by your side to guide you through the murky maze of contract terms, phrases and conditions.

Confucius Say:
“Man who starts out on journey alone and without a guide is soon lost and bewildered and he who continues on his excursion alone has a fool for a guide.”

Arizona is one of the few states that engage a little understood protocol known as “The Threshold Rule”. “The Threshold Rule”, simply stated, means if a consumer literally crosses the threshold of a builder’s showroom office entrance, the consumer gives up his/her right to FREE transaction representation. That is to say, the overwhelming majority of builders in Arizona have an agreement with real estate brokers to pay a licensed real estate broker to represent the interests of a buyer at no additional cost to the buyer. However, the caveat to this seemingly altruistic gesture is that the buyer MUST bring his/her licensed real estate agent with him/her on their first visit to the builder’s showroom. Failure to do so automatically will forfeit the buyer’s right to have the builder pay for the buyer’s transaction representation.

Now, that is not to say that the buyer is not entitled to engage the services of a buyer representative, however, if the
buyer does choose to do so, the buyer will be responsible for paying the broker for that service.

Many consumers unwittingly believe if they do not engage the services of a licensed real estate agent, to assist them with the purchase of their new construction home, the builder will cut them a better deal because the builder will not have to pay the real estate broker. This could not be further from accurate. The money the builder has budgeted into the transaction to pay the buyer broker, if not spent on that mission, is not refunded to the buyer in any form. The builder simply puts those funds back into his profit portfolio and the buyer is left to tramp through the swamp of contract language, all alone.

Here are some passages from a few builder contracts. For professional reasons, the builders have not been named but these excerpts are quoted directly from builder contracts. If you would like more information about any specific language below, please eMail Lori.and.G-II@RealEstateInPhoenix.net or call us at 602-796-5674.

Builder “W” Contract: “…Buyer’s obligations under this Contract are not contingent upon Buyer obtaining any specific interest rate on the loan or other loan terms…”

Builder “X” Contract: “…FINANCING, Buyer understands and agrees that obtaining financing is not a contingency or condition precedent to Buyer’s obligations under this Agreement…”

Builder “Y” Contract: “…Any delay in the Closing by Buyer… …shall constitute a material default hereunder by Buyer… …It is expressly agreed that the House… …may be subject to certain “punch list” items for additional work… the existence of such punch list items will not give Buyer cause to delay the closing or cancel this Contract. Punch list items may include failure of operation of appliances, electric outlets, plugs or fixtures…”

Builder “Z” Contract: “…AGENCY DISCLOSURE: …Our sales agents at the project where the Home is located solely represent us…”

So, what could the penalties be if the buyer is late to close on the property.

Builder “W” Contract: “…a late Closing fee equal to $300.00 per day for each day from and including the original Closing Date scheduled by Seller to and excluding the actual day of Closing…”

Builder “X” Contract: “…a late closing fee equal to $75.00 per day for each day from and including the scheduled closing date and including the actual day of closing…”

Builder “Y” Contract: “…a late closing fee equal to $50.00 per day for each day and including the Closing Date, to and excluding the actual day of Closing…”

Builder “Z” Contract: “…You agree to pay us a $100 per day extension fee for each day Closing is extended…”

This message covers ONLY the tip of the iceberg of Buyer Representation for buyers who wish to purchase New Construction from builders in Arizona.

If you would like to know more about how to take advantage of Buyer Representation, paid for by the builder, please contact us. We can be reached at cell phones 602-574-5674 for Lori, 602-796-5674 for G-II or by eMail at any number of eMail addresses, such as Lori.and.G-II@RealEstateInPhoenix.net or Lori.G-II@AirForceHomeSeller.com.

Bye till next time. Lori and I truly wish you and your family a Happy, Healthy, Safe, and Prosperous 2007!

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This article has been written by
"G-II". All rights reserved
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