Archive for the 'Agents & Brokers' Category
Legal Lies
So now we find out what it’s all about. Working as a real estate agent. Lesson 2 is taught by the same instructor as Lesson 1. Class starts with a discussion of the MLS (Multiple Listings Service). The MLS is used by Real Estate Agents, particularly Realtors (Realtors are a group of agents who promise to adhere to a set of guidelines…Realtor is a trademarked term) to list homes. A standard MLS listing shows a grainy picture of the home, and a brief description of the unit. The bottom half contains information only the agents can see, including how much of the commission is being offered, and how to get into the home. The instructor tells us at this point that we are going to have to embrace technology. He gestures at me and my laptop and proceeds to instruct everyone in the class to buy a cell phone, PDM, Laptop, GPS and a…wait a second, someone raises their hand and asks, what is a PDM?
“PDM you know, a blackberry” More blank stares. The man obviously isn’t familiar with the now in term of PDA for personal digital assistants, so he struggles to explain to the class what exactly a PDM is. It quickly becomes apparent that the class is not a room of technically proficient people, and certainly not too bright ones either. The young man ahead of me gets obviously confused by the concept of a GPS, and asks how the MLS is able to put houses on the internet, and how much of the internet the MLS owns…
I’m a geek, and hearing people ask ridiculous questions like how much of the internet is currently owned by the MLS brings the taste of vomit to my mouth. Really, does this guy not understand that the web is a system of tubes?
From there, the instructor proceeds to show us some overheads of MLS listings. First, we see a single family home, then a condo…then he proceeds to shows us half a dozen million dollar plus listings. For those unfamiliar with the Utah Real Estate Market, prices have been historically low, and the average home price is still in the low 200,000s. Million dollar homes are extremely rare, and them selling for that much occurs even less frequently. The first million dollar home is actually 2 million. It’s a ridiculous 7,000 square foot home, and offers a 3% commission. The whole class let out a whistle. Everyone’s face lit up, and excited whispering went around the room. The instructors asked if anyone had any idea what kind of a commission that would be. The obvious number of 60,000 wasn’t quite so obvious to the rest of the class who chirped with answers ranging from: “at least 600,000″ to the girl counting off “31,000…32,000…33,000″ to the guy plucking away for at least two minutes on his calculator to finally answer loudly “that’d be $6000!!!”
Obviously math is not a strong point of my classmates or instructor, as it takes him two attempts to finally come up with the answer of 60,000.
We are then shown several other ridiculously priced properties for the sole purpose of exciting everyone with some odd greed. And it worked. I’ve never seen a group of people become so excited at the prospect of taking their share of the most expensive properties on earth.
After this excitement, we were treated to another exciting prospect. The legality of puffing.
Puffing is a nice term for lying. It’s considered a legitimate method of describing homes on the MLS, as long as the puff isn’t too excessive of a lie. An example of this would be, an agent can legally list your home as being the most beautiful place in the valley, but the agent cannot say something like “there is no lead paint” when there is. The difference in lies to be honest doesn’t seem too clear to me, as a lie is a lie. The class loved it however, and everyone began to chirp excitedly about the fortunes they could make by telling these little puff lies. This brought me to the realization of something I hadn’t quite realized before.
Agents lie. They want you to buy the house, so they will tell you that it’s just about to go off the market, that this is the only place in the neighborhood at this price. It’s very under priced. It won’t last long. This is in amazing condition. This really is the only place you’ll be able to get at this price, and with this view. I have seen this market, and I know this is the only place of this size. etc…
What scared me was some of the examples given were the exact words I’d heard agents tell me in the past. They must have taken notes from this lesson. This brought us to the part of the lesson that dealt with just how much one can do to sell a person a house without actually breaking a law. The instructor shared a story about a home he had to show which was right next to the train tracks. The three most important aspects to real estate are location, location, and location we were told. When the market is cold, homes in good locations still sell, when it’s hot, even the homes next to the tracks sell.
Well the instructor brought his clients to this particular place, and was listing off all the wonderful puffs the place had when a train came by so loud it nearly knocked them over. He frantically called the listing agent who recommended rushing the clients into the master bedroom until the train was gone. Sure enough, the master bed was sound proofed, and the clients bought the house. Moral of the story? Don’t bring them when the train is coming by! Actually, the moral he explained of the story is that a good agent will do his moral duty to disclose if something is overpriced, but only do it once and let the client decide. Don’t push them too hard from a bad buy, otherwise you’ll lose the commission.
And after all, the most important thing is that commission. We were instructed a few times that the client’s needs to are to be looked after before the agent’s interests. But in the same breath we were warned not to do anything to chase away the sale.
This brought us to an interesting topic. Disclosure of stigma. A home is considered stigmatized if something negative has occurred in it. An example of this would be a beautiful manor in the Argentine city of El Dorado where I visited a friend who was able to rent the entire thing for the equivalent of $150 a month. How? The last owners had been hacked up and tossed down the well. There were still blood stains on the well. For this reason, no one else in the rather small town would willingly rent the place for fear of ghosts, or just bad karma. As you can see from the picture, neither my friend nor myself were very superstitious in this regard.
Some states require that a stigma be declared to all potential owners of a home. Utah is the opposite, stating that it is illegal for a stigma to be disclosed to potential buyers. So an agent can know full well that the last 5 owners of the home have died mysteriously within the last ten years, and still sell the place without saying a word about any of that. For this reason, it’s probably a good idea to check with your local police station for any big incidents that may have taken place at the home you’re planning to buy. Surprisingly this restraint extends to Sex Offenders, which will shock those in states under Megan’s law, while child molesters are required to register, agents are NOT required to let the buyer know anything about their neighbor and his past crimes. For this reason, you should definitely look at the Utah Sex Offender registry before moving in. Your agent will likely NOT tell you if your neighbor is a registered sex offender, even if your agent knows, because of the stigma laws. He wants that commission!
Our instructor proceeded to tell a story about a great sale he was about to pull off on a home where the previous owner had committed suicide. The buyer was from out of state and about to close when she learned that the home had a suicide within it. Our instructor proudly claimed that he hadn’t known about the suicide, but declared that even if he had, law would have force him to keep it quiet. The classroom visibly felt sympathy when he stated that the sale fell through.
All of this had piqued my interest. I raised my hand and asked. “What if being haunted IS the selling point of the house? Would it be illegal to put it on the MLS as a haunted mansion? The instructor didn’t seem to understand my question, or didn’t understand it and brushed it away as being absolutely illegal.
In the process of writing a book about real estate investing I’ve come across quite a few people who flat out hate real estate agents, and swear against using them. Having purchased my own home as a For Sale By Owner, I have a firsthand knowledge of how little is actually done by an agent in order to earn their commission. My past experiences with dozens of agents have ranged from decent to utterly painful. In order to practice real estate in most states, it is required that you possess a Real Estate License. I decided to find out just what exactly is taught at Real Estate School, and so just the other day, I went down and enrolled.