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Real Estate, Politics, and Ice Cream

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Real Estate is Politics

I was told once that if I was in real estate, then I was in politics. I casually dismissed the statement as ‘whatever you say, I don’t want to be involved with politics’. Over time I have come to realize just how intertwined our real estate industry has become with politics. I’m not here to talk about McCain vs Obama and how the president will affect your house value or the capital gains tax for investors, this post is about local politics.

Local Politics Affect Your Real Estate Market

Whether it’s a new zoning law, subdivision regulations, or impact fees, local politicians have a huge affect on your local real estate market. As an example, city or county elected officials have the power to enact impact fees. An impact fee is a fee that is implemented by a local government on a new or proposed development to help assist or pay for a portion of the costs that the new development may cause with public services. Who do you think really pays for the impact fees…the developer, builder, or homebuyer? Right, the homebuyer will have these costs passed through to them and a house priced at $200,000 before impact fees will now be $210,000 (assuming $10K impact fee per lot). This makes you wonder about price appreciation in a growing area with impact fees? The other side of the coin has the land owner’s taking the hit as developers are not willing to pay as much for their property to offset the impact fees. Either way, it just doesn’t seem like a free market price when governments’ makes such rules. Local politicians often times represent special interest groups, such as no-growth nimby‘s, who can have a huge effect on your ability to earn a living. Suppose every new law, zoning change, and new development approval/denial was hanging on the vote of a commissioner who was won election with help from a no-growth special interest group. Do you think the real estate industry will flourish under their leadership? Probably not. You’d be well-served to pay attention to who is running in your local elections and be sure to spread the word to other Realtors to support the right candidates.

Realtors Need to Understand Local Politics and Policies

Tomorrow, our local Realtor association will be addressed by one such no-growth commissioner and I’m willing to bet an ice cream cone for everyone who reads this that at least 90% of the Realtors in attendance will either a) have no idea who the speaker is or b) have no idea he was elected by a no-growth special interest group. His presentation will cover changes to the our local subdivison regulations. One particular sticky point is changing the private property owner’s rights to subdivide their acreage 4 times without needing a county review to be allowed to happen only once every 3 years. In other words, stifling growth by delaying subdivision of acreage tracts. I hope that our audience catches on to this and ask questions such as, why this change is needed, especially in a down market where no one is risking new development? why limit private property rights? etc…

How Do You Make a Difference

Knowledge is the difference maker. First, you must be informed of the local political scene in your market. Start by reading the local newspaper (odds are they have not gone online yet and you’ll be forced to get ink on your hands to learn most of this stuff). Follow the local races for mayor, commissioner, council positions, etc… Meet with your local city and county managers. Ask them questions about growth policy. Show up at council meetings, county hearing, etc.. and see for oyurself who is voting for what and ask why. Share what you learn with other Realtors, contact your local Realtor association and inform them of the issues at hand. Ask for support for the right candidates and issues.

Raise awareness by blogging local about politics! Why ice cream in the title? Because I love ice cream.

Chaotic Good adventurer on a quest to optimize the lives of others. Husband & Father to Wolverines. Founder of RETSO + Managing Director at Path & Post.

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7 Comments

7 Comments

  1. Mike Lefebvre

    September 15, 2008 at 7:07 pm

    Brad,
    I read the whole thing looking for the ice cream tie-in because, I too, am a slave to this frozen temptress. Even when it’s bad, it’s still pretty damn good. Great advice for agents looking to keep on top of local happenings and manage the rocky road of local politics (ugh…sorry).

    Based on your post, I’m suggesting a make-your-own-sundae bar at the next council meeting.
    Dig in, Governor!

  2. Jim Duncan

    September 15, 2008 at 9:22 pm

    Brad –

    Thank you for an outstanding post and reminder! Politics touches nearly every facet of our lives – personal and professional.

    A sampling – impact fees, grantor’s tax, water tap fees, mil rates, schools’ budgets, growth management, transit and transportation – the list is endless; every single one of these affects our business in one form or another.

    As Realtors and bloggers, it is important to know about, and to educate our readers about issues that affect property values, quality of life and so much more.

    Take the time to go to a public meeting – it’s fascinating what impact seemingly innocuous and impotent conversations can have on everyday life.

  3. Matthew Rathbun

    September 15, 2008 at 9:28 pm

    Brad,

    This is great insight. I’ve been an active RPAC contributor and believe in the system when applied to the local level. It’s been a real challenge to get other realtors to understand taht elections, especially local elections have a significant impact in their long term business.

    All the stuff that Jim noted is VERY true and VERY important. Poorly applied “smart growth” and other bad programs hurt everyone. The real problem is that too many agents are only looking 30 days out to the next closings and not looking years away during a career to see how the decision of the elected officials effect them adn their clients on many different levels.

    P.S. I LOVE Ice Cream!

  4. Rich Jacobson

    September 15, 2008 at 10:29 pm

    Brad: A very timely and exceptionally encouraging article. It amazes me how apathetic we’ve become, especially when we have such a vested interest in the process/decisions being made that can directly affect our financial well-being. I’ve been involved in a huge tidelands issue in a nearby community, where we’ve been fighting against State bureaucracies and departmental red tape. If we’re successful, it would have a major positive impact on future land development. We need to be intimately involved in the local political process!!!

  5. Bill Lublin

    September 16, 2008 at 2:42 am

    Brad;
    You makje a great point, and one that is worth yelling through the Blogiverse at the top of your lungs – Ice Cream may be the perfect food
    😉

    But there is another point you made, about the need to have representation in Local politics – that is even larger than the post might indicate – If it weren’t for REALTOR associations on the local , state and national level, our industry would face even more challenges than we do today (which are certainly sufficient). Not onyl through RPAC, but also through RPIC , there are staff and volunteers working diligently to see that we are represented everywhere we need to be – in fact if you were to go to realtor.org you would see no less than 74 issues NAR is following under the Government Affairs tab – some of which certainly might be worth blogging about

  6. Brad Nix

    September 16, 2008 at 3:12 pm

    guys:

    Politics is a subject I think most Realtors prefer to ignore or leave to others to sort out. However, I was inspired by the ovation received when I challenged our local commissioner at this morning’s meeting and the general interest by our members present. It seems Realtors care about the issues and want to have a voice (many are now showing up tonight at the public hearing), but just need a push in the right direction, someone to rattle their cages or someone to champion their causes. I encourage everyone to become more aware of local politics and how they relate to real estate (almost everything does). It starts with awareness and then action follows.

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Coaching

Disputing a property’s value in a short sale: turn a no into a go

During a short sale, there may be various obstacles, with misaligned property values ranking near the top, but it doesn’t have to be a dealbreaker!

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magic eight ball

It’s about getting your way

Were you on the debate team in high school? Were you really effective at convincing your parent or guardian to let you do things that you shouldn’t have been doing? How are your objection-handling skills? Can you flip a no into a go?

When working on short sales, there is one aspect of the process that may require those excellent negotiation or debate skills: disputing the property value. In a short sale, the short sale lender sends an appraiser or broker to the property and this individual conducts a Broker Price Opinion or an appraisal, using special forms provided by the short sale lender.

After this individual completes the Broker Price Opinion or the appraisal, he or she will return it to the short sale lender. Shortly thereafter, the short sale lender will be ready to talk about the purchase price. Will the lender accept the offer on the table or is the lender looking for more? If the lender is seeking an offer for a lot more than the one on the table, mentally prepare for the fact that you will need to conduct a value dispute.

Value Dispute Process

While each of the different short sale lenders (including Fannie Mae) has their own policies and procedures for value dispute, all these procedures have some things in common. Follow the steps below in order to conduct an effective value dispute.

  1. Inquire about forms. Ask your short sale lender if there are specific forms that you need to complete in order to conduct a value dispute. Obtain those forms if necessary.
  2. Gather information. Your goal is to convince the lender to accept the buyer’s offer, so you need to demonstrate that your offer is in line with the value of the property. Collect data that proves this point, such as reports from the MLS, Trulia, Zillow, or your local title company.
  3. Take photos. If there are parts of the property that are substandard and possibly were not revealed to the lender by the individual conducting the BPO, take photos of those items. Perhaps the kitchen has no flooring, or there is a 40-year old roof. Take photos to demonstrate these defects.
  4. Obtain bids. For any defects on the property, obtain a minimum of two bids from licensed contractors. For example, obtain two bids from roofers or structural engineers if necessary
  5. Write a report. Think back to high school English class if necessary. Write a short essay that references your information, photos, and bids, and explains how these items support your buyer’s value. This is not something that you whip up in five minutes. Spend time preparing a compelling appeal.

It is entirely possible that some lenders will not be particularly open-minded when it comes to valuation dispute. However, more times than not, an effective value dispute leads to short sale approval.

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Coaching

Short sale standoffs: how to avoid getting hit

The short sale process can feel a lot like a wild west standoff, but there are ways to come out victorious, so let’s talk about those methods:

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short sales standoff

What is a short sale standoff?

If you are a short sale listing agent, a short sale processor, or a short sale negotiator then you probably already know about the short sale standoff. That’s when you are processing a short sale with more than one lien holder and neither will agree to the terms offered by the other. Or… better yet, each one will not move any further in the short sale process until they see the short sale approval letter from the other lien holder.

Scenario #1 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they will proceed with the short sale, and they will offer Bank 2 a certain amount to release their lien. You call Bank 2 and tell them the good news. Unfortunately, the folks at Bank 2 want more money. If Bank 1 and Bank 2 do not agree, then you are in a standoff.

Scenario #2 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they cannot generate your approval letter until you present them with the approval letter from Bank 2. Bank 2 employees tell you the exact same thing. Clearly, in this situation, you are in a standoff.

How to Avoid the Standoff

If you are in the middle of a standoff, then you are likely very frustrated. You’ve gotten pretty far in the short sale process and you are likely receiving lots of pressure from all of the parties to the transaction. And, the lenders are not helping much by creating the standoff.

Here are some ideas for how to get out of the situation:

  • Go back to the first lien holder and ask them if they are willing to give the second lien holder more money.
  • Go to the second lien holder and tell them that the first lien holder has insisted on a maximum amount and see if they will budge.
  • If no one will budge, find out why. Is this a Fannie Mae or Freddie Mac loan? If so, they have a maximum that they allow the second. And, if you alert the second of that information, they may become more compliant.
  • Worst case: someone will have to pay the difference. Depending on the laws in your state, it could be the buyer, the seller, or the agents (yuck). No matter what, make sure that this contribution is disclosed to all parties and appears on the short sale settlement statement at closing.
  • In Scenario #2, someone’s got to give in. Try explaining to both sides where you are and see if one will agree to generate their approval letter. If not, follow the tips provided in this Agent Genius article and take your complaint to the streets.

One thing about short sales is that the problems that arise can be difficult to resolve merely because of the number of parties involved—and all from remote locations. Imagine how much easier this would be if all parties sat at the same table and broke bread? If we all sat at the same table, then we wouldn’t need armor in order to avoid the flying bullets from the short sale standoff.

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Coaching

Short sale approval letters don’t arrive in the blink of an eye

Short sale approval letters may look like they’ve been obtained simply by experts, but it takes time and doesn’t just happen with luck.

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Short sale approval: getting prepared, making it happen

People always ask me how it is that I obtain short sale approval letters with such ease. The truth is, that while I have more short sale processing and negotiating experience than most agents and brokers, I don’t just blink my eyes like Jeannie and make those short sale approval letters appear. I often sweat it, just like everyone else.

Despite the fact that I do not have magical powers, I do have something else on my side—education. One of the most important things than can lead to short sale success for any and all agents is education.

Experience dictates that agents that learn about the short sale process
have increased short sale closings.

Short sale education opportunities abound

There are many ways to become educated about the short sale process and make getting short sale approval letters look easy to obtain. These include:

  • Classes at your local board of Realtors®
  • Free short sale webinars and workshops
  • The short sale or foreclosure specialist designations

As the distressed property arena grows and changes, it is important to always stay abreast of policy changes that may impact how you do your job and how you process any short sale that lands on your plate.

The most important thing to do is to read, read, read. Follow short sale specialists and those who blog about short sales on AGBeat, Google+, facebook, and twitter. Set up a Google Alert for the term ‘short sale’ and you will receive Google’s top short sale picks daily in your email inbox. Visit mortgagor websites to read up on their specific policies and procedures.

Don’t take on too much

And, when you get a call from a prospective short sale seller, make sure that you don’t bit off more than you can chew. Agents in most of America right now are clamoring for listings since we are in the midst of a listing shortage. But, if you are going to take on a short sale, be sure that it is a deal that you can close. And, if you have your doubts, why not partner up with a local agent that can mentor your and assist you in getting the job done? After all, half a commission check is better than none!

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