Scam Alert!

 Posted by at 4:20 pm
Oct 292012
 

The Maine Association of REALTORS recently issued a scam alert to its members. Apparently inquires are being made via emails to the listing brokers of fairly pricey properties. All were from buyers from other countries stating that they had found their dream home online, had viewed all the pictures, and wanted to buy the home sight unseen. The emails were well written and sounded legitimate.

MAR warns that while these may be legitimate, they also could constitute a scam. Certainly buyers from other countries buy homes in Maine. What raises suspicion is the fact there have been a number of these inquiries around the state following the same pattern. Following up, slowly, carefully, and gently with the purported buyers is urged.

Previous scams have earned the trust of the agent prior to a request for account information into which to send their money. In previous scams there also has occasionally been a check or a wire issued with a reques for “change.” The original check or wire then turns out to be bogus. Or, they simply gain the account information and raid the account.

While this latest round of inquiries been addressed to licensees, it is entirely possible people who are trying to sell their own home could become a target. Be a little suspicious!

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Escalation Clause in Offer?

 Posted by at 7:49 am
Oct 232012
 

Every so often an idea will surface that sounds good at first, but deserves some critical thinking. A recent question from a student regarding an “escalation clause” in an offer to purchase serves as an example.

The student’s client had been advised to insert an escalation clause into her offer. For those unfamiliar with the concept, the escalation clause states that the buyer will offer $1000 (for example)  above any other offer the seller receives. The buyer (hopefully) “caps” this with a specific amount. The buyer was tempted to do this because she is in a “bidding war” with multiple offers being made on the property she wants to purchase. This approach might at first glance seem to guarantee she will “win” the war.

As the student correctly analyzed, a fundmental problem with this is it could require the seller’s agent to reveal terms of competing offers. Under Maine License Law and Rule, this would not be permitted without the permission of those other buyers.

Another interesting twist on this: what would happen if two buyers used the same escalation clause?

But beyond that and more importantly, it’s simply bad strategy.

If the buyer uses an escalation clause to effectively tell the seller “I will pay $1000 more than any offer you receive up to $100,000,” an astute seller would either negotiate accordingly or simply respond, “I’ll accept your offer of $100,000.” The seller is under no obligation to justify his or her offer based on receiving other offers.

One of the discussions I often have with buyers is that while negotiation is part of the process, we need to remember this is about purchasing a property–not about proving who is the best negotiator. In the example we are using, the buyer has established what the property is worth to him or her and announced it to the seller. Why not just offer what the property is worth right at the start?

Reverse the situation and it becomes obvious this is an ill-advised tactic. I do not know too many sellers who would inform a buyer, “The lowest offer I will accept is $100,000, but if you’d like to make a higher offer I’ll take that one.” An escalation clause with a cap equates to “The highest I will go, but if you’d like to accept less, I’ll do that.”

Even when there are multiple offers on the same property, this is not truly a “bidding war” because we are not conducting an auction. We simply have several buyers competing to purchase the same property. Also, the seller is under no obligation to accept the offer with the highest price–he or she might well consider accepting an offer with a lower price but better terms. For that matter, the seller is under no legal obligation to accept any of the offers.

If you are buying or selling property, ask the agent representing you to review all of the options both parties have in the negotiating process and remember what you are trying to accomplish.

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No Worse Than…

 Posted by at 8:43 am
Oct 062012
 

“Remember, people will judge you by your actions, not your intentions. You may have a heart of gold – but so does a hard-boiled egg.”

 – Author Unknown

Having recently experienced a rather painful transaction and participated in the development of a course on buyer representation, I am not at all suprised by a study earlier this year that revealed that “Buyer Satisfaction with Real Estate Brokerage Companies Hits All-time Low.” You can read some highlights on the Real Estate Economy Watch website.

One of the things I found interesting about the analysis of the latest data (based on national data involving large companies) is the rationalization that this is somehow due to the difficult market. Although I must say, to J. D. Powers credit they note that the companies with the highest ratings are inclined to be more skilled at managing the customer’s expectations.

While the article obviously doesn’t report all the data, the analysis yields some interesting conclusions. “Notably, although the agent/salesperson has the largest impact on overall customer satisfaction among both home buyers and sellers, customer loyalty is stronger toward the real estate company than toward the agent. Less than 20 percent of customers say they ‘definitely will’ switch real estate companies if their agent moves to another company.”

If I owned a company, I’m not sure that I would sleep well at night as a result of that. This could be as much about inertia as loyalty. Let’s not miss the import of viewing these numbers from a slightly different angle. The data is suggesting that only one in five (20%) of customers see enough value in their agent to stick with him or her if that agent moves to a different company. Something doesn’t add up.

Note that the same analysis suggests “the agent/salesperson has the largest impact on overall customer satisfaction among both home buyers and sellers.” That’s a statement that’s hard to disagree with. So help me understand how an agent who couldn’t create value and loyalty on an individual level creates a high level of customer satisfaction for (and loyalty to) the company, please.

I’m the first to admit that the current market situation is causing a crisis for many agents and companies. In plain language, it’s darn tough to make a living in real estate–especially in rural Maine. But agents and companies should not be making that the customer’s problem. Managing expectations ought to be about the market, not about the level of service we are willing and able to provide.

Unfortunately, when satisfaction decreases, so do expectations. Some years ago Tom Peters had a lot of fun with a ficticious company who’s slogan was “We’re no worse than anybody else.” Unfortunately, that might well be what the survey is identifying as loyalty. Buyer satisfaction is at an all-time low. Seller satisfaction is decreasing. So the tempting conclusion for customers is “might as well stick with company x, they’re no worse than anybody else.”

Blaming the market doesn’t work, really. What about customers? Do they contribute? If customers do have a role in the state of affairs it is in the acceptance of mediocrity. (The survey notes that 60% of the respondents were repeat buyers and sellers–not limited to one experience.)

Customers: Raise the bar, increase your expectations. You are probably entitled to a lot more than you think. You can change these numbers.

If you are dissatisfied or having issues with your agent or company, check out this article What’s the Number for the Real Estate Police? As one who loves platitudes, I would close with “if you are not part of the solution you are part of the problem.”

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