Credit Rule #1: They Won’t Bend the Rules

At some point in an intelligent young person’s life, he or she discovers that there are ways of getting around the rules. Some individuals learn to negotiate at a very early age and hone their powers of persuasion. However, they run the risk of running into trouble with their credit scores if they fail to understand that creditors won’t be manipulated.

Recently, a friend of mine bemoaned his daughter’s situation to me. (Please note that names and details have been changed to maintain their privacy.) Aaron and Mona had helped Belinda buy her first condo when the young woman got her first real job. The couple took money out of their savings toward retirement for the down and borrowed the rest. Later, after escrow closed, they put Belinda on title, too, thinking that this would help establish her as a home owner. This was a couple of years ago, so prices were still reasonable for cosmetic fixers. They got a good interest rate, and the payments were manageable—or rather, they should have been.

Belinda went into sales, and some months were better than others. She got a roommate, and that helped, but Aaron found himself supplementing her mortgage payments more often than he would have liked to. A year later, Belinda was doing well, and she promised her parents that she would take over the payments completely.

Within five months, Aaron and Mona got a notice that the condo was in foreclosure, and that they were going to lose it. Aaron immediately called Belinda, who burst into tears. Apparently, she was late on several payments, and then she had gone in to talk to someone at the lender’s office who had assured her that she could take another week to get the money together.

Unfortunately, Belinda hadn’t understood that a low-level person wasn’t going to able to bend the rules for her. And certainly no one in a management position was going to do it either.

Luckily for Belinda, her roommate had a friend in college whose parents wanted to buy him a condo near the university. Aaron and Mona were able to arrange the sale themselves and sold the unit cheap but quickly. There was a prepayment penalty that ate up the profit they would have made, but at least they were in the clear as far as the condo was concerned.

Belinda has moved back in with her parents, who are now looking into refinancing their home to pay off other debts that they accumulated along the way, fixing up and furnishing the condo. Due to the foreclosure, they’re looking at a 3/1 ARM starting at 9%, and their monthly payments on the house that they’ve lived in since Belinda was a toddler will double.

So even if you think your kids understand, please tell them rule #1: the rules of credit won’t be bent. Pay your utilities, rent, mortgage, credit cards, and other bills on time. One late payment on one bill can affect your interest rates for other accounts. And if you can’t afford all those payments, don’t buy on credit. In fact, don’t buy anything at all.

An article that explains how one late payment will affect everything else:
http://moneycentral.msn.com/content/Banking/Yourcreditrating/P56621.asp

San Bernardino North Lake Project

For some years now, a battle has been going on over the proposed North Lake Project in the City of San Bernardino. Proponents say that it would help to revitalize the area by bringing in revenue and that the lake front area would offer pleasant park sites plus be valuable commercially. At any rate, the lake would be more attractive than the poor neighborhood currently there. And that’s where things get complicated. Opponents argue that the residents, many of whom are Latino and African American, are simply once more victims of racial prejudice.

As for myself, I have some questions.

1) How are they going to make it clean enough? There are mechanic’s shops and other industrial sites in the area. Would you drink the water from there?
2) Houses there have gone up from about 30k to 250k and higher. How are they going to afford to give all the homeowners the current market value for their properties?
3) This is one of the most affordable neighborhoods left within 1.5 hours of Los Angeles. Even if they give the residents fair market value, where will they be able to buy another home without having to leave the region?
4) Is this really an answer to poverty or will it just sweep it under the rug by forcing the poor to move elsewhere?

In the meantime, there are those who continue to buy and sell homes in the area. After all, this has dragged on for a long time, and people have to go on with their lives. The only thing to do is disclose the situation and tell buyers to call the city and the relocation company Overland Pacific & Cutler to see if anyone has a clear schedule for when they’ll start buying homes.

As I told someone who had decided not to accept an offer on his property, he needs for the city to show him the money and a firm date. Otherwise, he could hold his breath until he turns purple.

City sites:
http://www.ci.san-bernardino.ca.us/pdf/DevSvcs/NOC-NOA.pdf
http://www.ci.san-bernardino.ca.us/depts/mayor/downtown_revitalization/joint_public_hearing.asp

Proposed map of affected area:
http://www.ci.san-bernardino.ca.us/civica/filebank/blobdload.asp?BlobID=2589

Recent Press Enterprise article:
http://www.pe.com/localnews/sanbernardino/stories/PE_News_Local_water17.efe8.html

Site by area residents against the lake project:
http://www.sbeminentdomainabuse.com/id34.html

Same Price, Different Cost Year after Year: the Effect of Mello-Roos

Just because 2 houses have the same price doesn’t mean they’ll cost the buyer the same amount. Mello-Roos is a special tax that comes into play when developing tracts in new areas. Among other items, sewer and gas lines are expensive, and the cost gets handed on down to the buyer (and future buyers) for some thirty years. The amount differs from tract to tract, with the total tax sometimes as high as 1.8%. This situation can raise monthly payments by hundreds of dollars. To further complicate matters, Mello-Roos may occasionally just be a set amount rather than a percentage, which is easier on buyers. So buyers should ask ahead of time if a house has Mello-Roos and figure out if they can handle the extra cost. The lender will also be interested in this information. Thus while many people prefer a newer home because it won’t have the maintenance issues of an older one, they also need to be aware that newness can have a price, too.
Since it can be complicated to have your agent find out the tax rate for every single property that he or she shows you, wait until you have picked out your top two or three choices. Then have your agent check with a title company to get the rate for each property and to find out whether or not there is Mello-Roos, a 1915 bond, and/or any special assessments. The listing agent may not even know these details, and while the taxes will be disclosed during escrow, you might as well know before you get there.

Useful sites on Mello-Roos are below:
http://mello-roos.com/pdf/mrpdf.pdf
http://www.clta.org/Publications/Title%20Consumers/Mello-Roos.htm

The seller got a sex change in escrow

It’s fantastic what you can get these days all at one place, such as a one-stop market for clothes, groceries, and caskets. A seller of mine recently got a sex change in escrow, and it was so easy. (Please note: names and details have been changed to protect the privacy of the … otherwise greatly embarrassed.)

I first became aware of a problem when I opened up the packet of documents that I was carrying to my sellers and saw that the cover letter began, “Dear Mr. Juana Arias.” I laughed, thinking that it was just a typo, and when I got to my sellers’ house, I told them about it, saying that it was a funny error considering that I’ve only known women at the escrow companies I’ve worked with.

Then we got to the grant deed that would require signatures in front of a notary public, and we got a big of a shock. It read: “Mr. Juana Arias, a married man, who took title as a single man, and Mrs. Guadalupe Arias, a married woman, who took title as a single woman...”

Juana and Lupe were sisters with long wavy hair and physical dimensions that would never lead anyone to think that they were male. Luckily for me, they thought the picture of themselves as man and wife more hilarious than insulting.

It was Sunday, so I couldn’t call escrow to find out what had gone wrong. I did call a notary public friend of mine, and he told me that there was just too much incorrect information to cross out and that no notary public could sign off on it. Escrow would have to redo the vesting.

The next day, I called escrow to ask about it.

“Oops,” said the escrow officer, “it should be Juan.”

“Actually,” I told her, “they’re Ms. Juana and Ms. Guadalupe, and they’re not married to anybody.”

“That’s weird,” she said. “We wouldn’t have made this up. Let me make some calls and find out what’s going on.”

She called me back a few minutes later to tell me that the error had occurred when Juana and Lupe first bought the house. Apparently, the vesting had gotten Juana’s gender wrong, and the notary public must have been blind. She could correct the mistake, but only by giving Juana a sex change.

The corrected version thus read, “Ms. Juana Arias, a single woman, who took title as a single man, and Ms. Guadalupe Arias, a single woman…”

In the future, if the house gets resold and people don’t know the history, someone is going to think that Juana was a transsexual. It’s amazing what escrow can do for people!

Why pet owners love the city of Riverside

The City of Riverside still allows people to have unlimited numbers of cats and licensed dogs whereas the County limits people to 9 and 4, respectively. I was surprised when I first moved here and found out about this situation because I would have thought that people in the country would have more room for animals. However, I came to realize that a horde of large dogs running loose in the countryside could wreak a lot more havoc than a houseful of Yorkies.

There are people who would like to see limits on cats and dogs in the city, and some think we’ll be inundated with compulsive cat collectors if word gets out. Others argue that limits would only discourage people from licensing their dogs. I wouldn’t say that people are moving to Riverside with their animals in truckloads, but on occasion I do get a call from someone who is looking for a kennel or a cattery. I myself came to Riverside with only 1 dog, but now that so many have found us, we’ll never be able to move away.

For now, the city is encouraging people to limit their animals by making it very expensive to license an unfixed dog. For people who breed expensive show animals, the higher license fee costs a lot less than a even a pet quality puppy while owners of beloved mutts are more likely to get around to having them altered.

Most recently, Riverside County is considering requiring pet owners to have their dogs fixed and microchipped.in the unincorporated areas. This idea sounds nice, but how feasible it is remains to be seen. Will animal control go around checking under every tail and between all shoulder blades? After all, they can’t even get owners to put a tag with their current phone number on their dogs’ collars.

For information on licensing in the city versus the county of Riverside, you can go to the first and second sites listed below. The last is a recent article in the Press Enterprise regarding the proposal to require altering and microchipping in the unincorporated areas.

http://www.riversideshelter.com/faqs1.htm#3
http://www.riversideshelter.com/license.htm
http://www.pe.com/localnews/corona/stories/PE_News_Local_S_animal25.58cffa5.html

Let the Cat out of the Bag

My brother is so allergic to cats that if he walks into a place where a cat lived 10 years ago, he’ll start having an asthma attack. It shouldn’t come as a surprise that he doesn’t like cats. I myself find most cats likable but occasionally run into the psychotic individual. In that respect, cats are very much like people. At any rate, if cats or any other pets have been in the house, the seller needs to disclose this fact on the form called the Seller Property Questionnaire, or SPQ.

A good place to first give a head’s up about the presence of animals is in the remarks section of the MLS. I like to warn agents about dogs and cats by adding, “Don’t let the cats out” or “Call first, so seller can put muzzle on French Mastiff.” (I hate surprises when showing property, such as the time I opened a garage door and met a growling Rottweiler. I quickly shut the door and went on to discuss the pros and cons of carpeted bathrooms.)

In the case of the “casa de los gatos,” as my little girl referred to a particular listing I had, the four beloved felines were micro-chipped and wore body harnesses with tags. I printed up signs that read “Please don’t let the cats out,” and we posted them on all exterior doors plus the door into the garage.

The signs worked very well. We didn’t lose a single cat, and while I don’t know if anyone had an asthma attack, I can say that everyone was warned long before they saw the SPQ.

At any rate, buyers should tell their agents upfront if they don't want to visit any houses where animals and/or smokers reside just in case. It will save everyone a lot of time and wheezing.

Dirty laundry

Sometimes it’s not lack of curb appeal that keeps a property from selling. Sometimes, it’s something that won’t be apparent from photographs or a driveby.

I was showing condos in Diamond Bar, and one of them was in a gated complex with multiple swimming pools and a tennis court. There were trees and flowers, and some of the units had a view of the golf course down the hill. One unit in particular was priced low and had been on the market for a while, so I decided to give it a try.

Now, I had managed to preview quite a few properties for my out-of-area buyer, but I had run out of time, and so we were going blind to this complex. I told Henry (not his real name) upfront that we would be “discovering” these particular units together. Luckily, Henry was very positive despite the rain and a bad cold, and so we tramped round and round, trying to figure out where the different units were hidden in the maze of buildings.

At last, we came to the one that was priced lowest. As I opened the door, we were greeted by an extra, extra large screen television that dwarfed the living room. There were various basketball posters and related paraphernalia, and we soon realized that the residents were Lakers fans.

In the kitchen, there was a folding door, behind which we found the washer and dryer. No detergent or softener scent. That should have been a red flag.

As we walked down the narrow hallway, things started to go downhill. The hall bath was dingy but not too mildewy. Still, there was something in the air. Then, we found it. Opening the closet of the second bedroom, we gasped at the sight of a 3-foot-high pile of smelly laundry. He liked sports all right, but he didn’t like to wash.

We pinched our noses and stumbled backwards out of the room. I shut the door, and we went on to the master bedroom and bath. The bed was in disarray, and there were clothes scattered about, less smelly but somehow more desperate looking. There was a photo of a child on the night table, and that’s when it hit me.

“It’s a divorced guy and his roommate,” I told Henry. “And they’re really helpless.”

“No,” he said, “men aren’t that helpless. We use it as a ploy to get women.”

“No woman is going to find this attractive,” I told him.

He had to agree with that one, and we left as quickly as discretion would allow.

I continued to watch that particular unit sit on the MLS for the next 2 months until Henry’s escrow closed and he was able to move into his new place across the street from the golf course. The bachelor pad eventually sold but only when it was about 20k below everything else in the neighborhood.

How (Not) to Write a Counter Offer

I spend about as much time preparing a counter offer as I do an offer. I like to talk to the buyers’ agent before they even write the offer, so that I can save time and paper. Then when I get the offer, I go over it with a highlighter pen (which won’t show up in faxes and photocopies), marking all the errors and incomplete spots. If possible, I call the agent and get as many pages corrected and refaxed as possible as I hate having to attach an addendum to the counter when I run out of space. I ask for the buyers’ lender letter, FICO scores, and proof of funds upfront, and I tell the agent that the counter will ask for them if they’re not included with the offer. Then I call the lender to ask if the offer is for the most the buyers can afford and to discuss how the loan will be structured. After that, I draft a counter for my sellers and include wording that the buyers will be preapproved by a loan officer I know since I’m not a lender myself and have only done the preliminary footwork. Then, we go over the draft to see if there are any details that I’ve left out. I do all of this because my sellers have enough juggling to do between their daily lives, preparing to move, and trying to keep the house perfect. They usually understand that I’m doing all the homework, but on occasion, I do have sellers who just can’t accept the information I provide. Not surprisingly, they’re the ones who can’t process the data I give them from the start.

I had some clients once who had an older home that they had fixed up nicely, but there were still some items that they hadn't taken care of before the husband got a job relocation out of state, and they ran out of time and energy. Unfortunately, before Joyce and Noah (not their real names) interviewed me, they talked to some other agents who told them that their little 2-bedroom, 1-bathroom house could get 70k more than the only sold comparable I could find from the previous 60 days. They decided to go with me, but they insisted on pricing the house 40k over the one comp. I agreed that the house might have sold for the amount they wanted if there weren't so many houses on the market, but they were sure that the quality of their house would win out over the supply versus demand rule. They promised to reconsider the price if they didn't get any offers, and we left it at that.

The months dragged by, and there were no offers. Joyce and Noah moved and rented an apartment while continuing to make payments on the home in Riverside. Only a handful of agents came by, and only half of them left their cards. I called for their feedback, and the ones who responded said it was cute, but their buyers expected another bathroom at that price. I kept asking Joyce and Noah if they were ready to lower their price, and they hesitated, saying that they didn't want buyers to think they were desperate even though the house had been vacant for quite a while. I finally told them that I didn't think anyone would notice because we had so few agents showing the house. In other words, the price of the house and its lack of a 3rd bedroom (let alone another bathroom!) were keeping it from popping up in agent searches on the MLS. Houses all around theirs were selling, and there were now two comps 20k under them, but interest rates were starting to go up, and I didn't think that the market would reach them before buyers ran out of spending power.

They finally lowered the price 10k, and a couple more agents brought clients to the house. Then nothing. After much discussion, I got the couple's permission to put in the MLS description that they would help with closing costs. At last, we got an offer. After subtracting for the closing costs they wanted, it was for 10k under the only comp I'd given them at the start. I talked to the buyers' agent, and he was frank with me, his buyers were maxed out and couldn't go any higher. So that went into the reject pile. Even I thought we could do better than that.

Several weeks went by, and a second offer came in. I looked over their FICOs and proof of funds, and I spoke to their lender. Their offer was at the maximum that they could get a loan for, and they were extremely borderline with insanely high interest rates due to past credit problems. Their monthly payment was going to be about $3,100/month. The lender was doing them a favor by reducing his own fees and allowing a slightly higher debt-to-income ratio. I reported these facts to Joyce and Noah, yet amazingly, they wanted to counter back higher to 1k short of their current list price.

"But they can't do it," I said. "They’re maxed out.”

“They can get another lender,” Joyce said.

“No one else will do the loan this high because they can’t make any money off these people,” I replied. “So what's the point of asking them for the impossible?"

"They can counter back," Joyce insisted. "They can increase their earnest deposit."

"What difference does that make?" I asked. "They have a higher than average deposit already, and you'll net the same amount either way."

It was getting late, and the couple wouldn't listen, so I finally threw up my hands, redrafted the counter, and called it a night.

Two days later, I called the buyers' agent to find out if they would be countering back. She told me that the buyers had gotten cold feet because of family troubles. If they could get back on track and if interest rates didn’t go up, they told her they might come back in a couple of weeks and resubmit an offer. I sighed, thinking that they were probably going to go look at other houses with another bathroom during that time.

Pride of ownership has its drawbacks

A realtor in my office told me that he took a seller to look at some of the other houses available around him with the hope that the client would realize that his own house was overpriced. A little bit of background: the house smells (even after replacing the carpet that the dogs had peed on), and the doors over the 3-car garage hide an illegal conversion (think fire trap). After they got back, the seller proudly told him, "See, I told you my house is better than the others!"

Pride of ownership can be a good thing in that it implies a responsible seller who has maintained the property, kept everything up to code, even updated. At the very least, the house ought to be spotless though stuck in the 50's. I had one client who is a perfect example of this--she had the house inspected for termites, tented, and the repaired spots painted before a buyer even came along. Despite the lack of granite counters, her house sold for over asking price. However, I've also seen cases where pride of ownership can also lead to the sellers taking less money rather than let someone they dislike move into their house.

We have some gorgeous window seat cushions that my in-laws gave us. I call them the $10k pillows. My in-laws put their large pool home on the market in the middle of the recession after falling in love with a tiny house on the beach that was priced much higher. Their own home didn't sell, and so my father-in-law got a bridge loan (now rare)in order not to lose out on the new house. They finally got an offer that was a little low, but what really upset them were the details. They knew that Vicky (not her real name) really wanted the house because she kept driving by and gazing at their rose bushes, but they thought Alan (not his real name) was just too obnoxious because he asked for the window seat cushions and the cats among other things. I never met him but thought he was being facetious, which isn't a good idea when writing contracts. Then another offer came in that was lower, and my in-laws took that one instead, countering the first buyers for back-up position. Alan was flabbergasted, which was exactly what my in-laws wanted.

So the cushions, which had been custom made to fit in that spot, stayed in the garage of the next house for some ten years before they came to live with us. Our little girl likes to play house with them, and our dogs lounge on them. The cats proceeded to claw up the new furniture and ruined a carpet because they were too fat to get out the pet door. They lived to a ripe old age, which was only fitting since they were worth so much! As for Vicky, my in-laws did feel sorry for her, and I hope Alan was more careful not to offend any more sellers after that.

The buyer had ADD among other problems

A couple of days ago, escrow called me to tell me that the buyer's earnest deposit check had bounced. I sighed, called the buyer’s agent, emailed my seller, and started preparing a notice to buyer to perform.

It happens occasionally that a buyer doesn’t understand that the earnest deposit check will be cashed at the start of escrow. It states on p. 1 of the residential purchase agreement that the check will be sent to escrow within 3 days of acceptance, but sometimes the buyer thinks that escrow will just sit on it until the loan funds. To be safe, I tell my buyers when we first start looking at properties that they’ll need about 1% with a minimum of $2000 for properties under 200k in our area as there are so few properties in that price range. I also say that the money should be in the account. Then I repeat this detail when we write the offer. I try to mention it a third time when I receive the check and log it into my office trust log. I also manage to repeat a few times that the date on the check should match the date on the offer. Then I explain that if the offer is rejected, I’ll return the check, and they’ll need to make out a new check should they decide to write another offer at a later date.

Some of my clients must think I’m forgetful because I repeat myself so often, but it has to do with one of my first buyers, a woman who had trouble remembering details that didn’t fit in with her ideas about real estate. I came to realize that she not only had Attention Deficit Disorder, she worked with some kind of a coaching group that taught people how to invest in real estate, and she firmly believed whatever she thought they had taught her…

I first ran across a child with ADD who wasn’t hyperactive when I was doing academic tutoring after college. I was perplexed at her obvious lack of short-term memory, and it took a lot of work just to teach her a short narration in Spanish. Later, when I finished graduate school and taught at a series of community colleges, I got to the point where I could pick out the students with ADD within the first week of class. I would gently tell them that I wasn’t a specialist, but that I suspected that there was a problem that they needed help with. Over and over again, they’d go to the disabled student program, they would take tests, and they would invariably find out that the reason they’d always been mediocre students was because they had ADD. Then, they’d get tutoring, tips on study habits, and would struggle through first semester Spanish. They’d limp on to the second semester, where they’d finally succumb. It was incredibly frustrating for them, and a few told me that they were successful out in the “real world” but had decided to go back to school to get a degree.

Karen (not her real name) appeared to be confident in her own field, which was as a military paramedic, but I had grave doubts about whether or not she would ever make a lot of money in real estate since she was in her forties and had never owned her own place. Later, someone told me that people with ADD can do well in stressful jobs because the adrenaline helps them focus. Well, real estate can be stressful, but not in a way that helps anyone read the contracts more closely.

She told me that she had signed up once to take a real estate course but quit when the instructor told the class that everything was in the books. She still had the books but hadn’t read them yet. This should have been a red flag, but I thought I could explain the major points to her in everyday language.

What Karen was good at was chatting. She would walk right up to people wherever we went and find out about the neighborhood. She had an exotic Asian and Caribbean background, had lived in Europe, and had lots of interesting stories to tell. She also had very unusual ideas about religion and divine retribution, which extended to her gun collection. She would have been inclined to use one now and then during our search for a property for her, but luckily for the annoying people on the freeway, she wasn’t carrying a gun on her.

The last afternoon I spent with Karen was our third outing in about as many weeks. I was driving on the 215 and was in mid-spiel about the local history when she suddenly pulled a hair out of my head and proclaimed, “I rebuke you in the name of the Lord.”

“Ow,” I said, rubbing my scalp. “What was that about?”

“That’s a gray hair,” she said, shaking it at me. “Before sin, we were immortal and didn’t age. So aging is a sin.”

“Aging isn’t a sin,” I told her. “It’s a reward for surviving.”

“I don’t plan on getting old,” she replied.

We were actually rather close to Patton State Hospital in Highland at that moment, and I should have dropped her off right then, but she had been referred to me by someone, and I was trying to do a good job. She was also pre-approved and not just pre-qualified by her lender. So I began talking about the condo complex I was taking her to and how there were several nice units there in her price range.

We visited 4 units in the complex, looked at the pool, and talked to some of the denizens. Then as I was preparing to drive away, she pointed to a unit that had a lockbox and a sign in the window.

“But it’s not showing available in the MLS,” I told her. “I don’t know anything about it. Maybe it’s already in escrow.”

But Karen was very insistent, and the condo was vacant, so even though I couldn’t get through to the agent, I thought it wouldn’t hurt to take a quick look. The condo turned out to be quite nice and a reasonable rehab job with only a few unfinished details. She was very enthusiastic about the place, and my hope began to revive that she would finally buy a place, and I’d be rid of her. Then the agent called me back, told me that it was her own property, and she was putting it on the market that day with a decent price and acceptable commission. She hadn’t even put it in the MLS yet. Things were looking up.

We raced back to my office in Riverside and started writing up the offer. I spoke with her lender, got details, and was about a dozen pages into the contracts when she said that she thought I had the wrong address.

“This is the condo you liked,” I told her.

“No, it’s not. The one I want is on the other street by the freeway.”

“No,” I said, showing her the Thomas Guide. “It’s on the next street over.”

I almost never get lost. I can’t remember people’s names to save my life, but I usually know where I am. But I couldn’t convince her. If you ever had the experience of having to prove to a child with ADD that the answer to 2 plus 2 is 4 just like it was yesterday, you’ll understand my predicament.

Finally, I said, “We can go back and make sure if you want.”

So we drove back to Highland, and I proved to her that I was right. She wasn’t at all apologetic, but I took it in stride. One of my personal rules is not to say, “I told you so” because I figure the other person is already feeling annoyed enough at being wrong.

We went back to my office and continued work on the offer. Then, I asked her for the check, which, as I'd told her before, should be $2000 for her to be considered seriously in the seller's market.

“Change it to $1000,” she said.

“That’s not enough,” I replied. “You know it should be $2000.”

“$1000.” She took out her checkbook and started writing.

Instead of choking her, I changed the figures and then starting printing up the forms.

When I gave her a printout of her estimated costs sheet, she balked at the closing costs.

“Why are they so high?” She asked.

“Well,” I told her, “you’re buying something, and there are costs. There are escrow fees, inspection fees.…” We’d been over this before, but she seemed to have forgotten. She frowned, then finally signed.

A few hours later, after she’d left, and I’d sent the offer, I got a call back from the listing agent. She liked the offer over all and was only going to counter that the deposit be increased to $3000. Excited, I called my buyer and told her that her offer was accepted and she only had to go up to $3000 on the earnest deposit.

“Why?” she asked.

“It’s to show that you’re serious, you know, as in ‘earnest.’”

“But how come people always say you can buy with zero down?”

“Well, you don’t have any down because you have 100% financing.” I sighed. We’d been over this numerous times. “You’d get it back at closing if you brought in all your closing costs. But this way, they’ll just deduct it from your closing costs.”

“So why do I have to have it now?”

I shut my eyes. “To show that you really want the place.”

“But I do want it.”

“Then go up to $3000.”

“I don’t have it.”

“What happened to it? You had your closing costs three weeks ago.”

She didn’t answer.

“Can you get it?”

“I’ll try.”

“So I’ll tell her that you’ll do it?”

“Yeah.”

I called the other agent back and told her that my buyer had agreed verbally to the counter. She faxed it at once and then was nice enough to put the listing in the MLS as pending.

Late that night, my buyer called me back.

“This guy I know says I only need $500 for earnest deposit money.”

“Is he a realtor?”

“Yeah.”

“Where?”

“Up North.”

“Not in the Bay Area.”

“Right.” Then she added, “And he says those closing costs are too high. That there’s a limit of what percent it should be.”

“Was he referring to the cost of the loan only or was he also referring to all the things you’ll need like a home inspection and the appraisal. It’s all on my web site that I told you about. You can show it to him.”

“He just said that there was a limit.”

“Well, he’s not here. I’m here and I’m your agent. These people want $3000, and they won’t settle for less. Can you get it?”

“I can’t get it. My friend was going to lend it to me, but he changed his mind.”

I shut my eyes. I wouldn’t have lent her anything either. “But your lender had verification of your funds.”

“Yeah.”

I rubbed my eyes. “So I’ll tell them that you’re not going to agree to the counter, and I’ll mail your check to you.”

“You can tear it up.”

“I’ll mail it to you.”

I called the agent right away and left a very apologetic message saying that the buyer had somehow spent her earnest deposit money during the last few weeks without telling me about it. I knew a lot of random details about her parents, her daughter, her ex, and flying the wounded out of Afghanistan, but I had no idea where her savings had gone to.

The next morning, I called the realtor who had referred her to me and told her what had happened.

“But she had the money. I saw her bank statement.”

“Well, she doesn’t have it now.”

“I told her not to buy anything.”

“I’m sure you did. I did, too.”

I’ve been fortunate since then and haven’t had any more buyers with ADD. I think they may have trouble slogging through my verbose web site. The only reason I even got Karen was because her first realtor could read quite well and liked my web site. She sent me another referral after that who turned out to be a very sane and intelligent woman. The only problem was, we then ran into … the seller’s agent with the son who had ADD…

To be continued…

The Real Estate Personality

A couple of months ago, I got an offer on a listing, and the fax cover from the other agent featured a cartoon of people begging on the street. Each one held a sign stating what he was desperate enough to do in order to show how needy he was. The last person's sign read: "Will work in real estate."

A lot of agents I know, including myself, didn't always plan to go into real estate. We set out on different career paths, but, due to changes in the economy and unforeseen life events, we chose to go in to real estate.

A couple of weeks ago, the assistant manager at my office found an interesting web site (similarminds.com) where you can take tests to determine your personality type. The 70-word Jung test is especially interesting. From there, you can read a description of your personality type at www.personalitypage.com, see a list of careers for your type, and also read about what sort of mate would work well with you.

Not too surprisingly, the other agents and I who have taken the test have generally found out that we should go into the career that we used to have! Hmm, I don’t think anyone’s personality type read “real estate agent.” But then maybe that’s because some careers are taboo, like “snake oil salesman.”

Most of my personality description read like one of my father, and the description of my ideal mate was my mother to a T. Very scary. In short, I’m an INFP or “questor,” also referred to as “The Idealist.” “High capacity for caring. Emotional face to the world. High sense of honor derived from internal values. 4.4% of the total population.” Is this what you expected to read about a real estate agent? Some of the career paths for me are “professor” and “writer” (been there, done both, nearly starved). Other careers are: counselor/social worker, psychologist, psychiatrist, musician, clergy/religious worker.

INFPs aren’t obvious candidates for the world of real estate. We’re introverted, thinking types who write rather than talk. I’ve learned to hold a conversation by focusing on the person I’m talking to and listening a lot. The other person almost always has something fascinating to recount, and someday, when I have time, it will all go into a series of novels. So, you’re thinking, how do I get someone to buy or sell a house?

Well, actually, I don’t. If he or she really likes a house we go to, can buy it, and needs to, it will happen. If not, I can usually figure that out without losing a lot of time. If the person wants and needs to sell a property, I find out as much as I can about the current market around that property, show the owner the data, take photos, write a description, and let agents and buyers know about the place via the Web, newspapers, signs, magazines, door hangers, postcards, open house, and so on until the right buyer comes along.

So what do I do that’s so hard? I … agonize. I wake up in the middle of the night, thinking about some detail that needs to be addressed. I call realtors, loan agents, and escrow officers, trying to resolve issues. I piece together the odds and ends of contracts, addendums, disclosures, and waivers to protect clients. When I have to, I dust, vacuum, mop, water plants, weed, and clean toilets (and these houses aren’t always vacant—the sellers just run out of time! And I was representing the buyers when I cleaned the toilets).

Luckily, since most of my clients have come to me via the website that my husband built, they have been very much like us. While my clients are all very different from each other in background and experience, they tend to 1) do research and plan ahead 2) have good credit 3) use email a lot. The last is a lifesaver for me because I can send them lengthy email messages letting them know what’s going on weekly and, if necessary, daily, even hourly. When it’s a really important issue, my clients and I are outgoing enough to call each other (this is extremely difficult for my husband’s personality—I still have to call restaurants to reserve a table because he can’t—he’s an INTP, which makes sense because he’s a physicist).

I’m probably not the right real estate agent for someone who needs to be told what to do and to be pushed into things. My husband and I always balk when someone tells us we need to buy something now. 9 times out of 10, I will walk away at that point, or if I do buy it, I’ll return it the next day. (My husband tends to read as much on the Web as possible on whatever it is that we’re thinking of buying before we go in and look at the item. Then he lets the salesperson talk and show us other makes and models before we buy what we intended to buy in the first place, that is, if it’s cheaper there than on the Web. If my husband is feeling charitable, he’ll correct the salesperson on a detail or two. When we get home, he’ll give me a rundown on all the technical mistakes the person made.)

I would probably have more transactions and make more money if I were pushier, but it wouldn’t feel right. And I guess I’m lucky because I make a reasonable living while being true to myself and working with clients I respect and enjoy emailing and talking to.

A quick look through the extroverted personality types show that these are the ones most likely to be sales representatives, particularly the ESTP type. Some of the traits are: “action oriented,” “live in the present moment,” “excellent people skills,” “attracted to adventure and risk.” This type “may be gamblers and spendthrifts” and “often has trouble in school, especially higher education.” “ESTPs have an uncanny ability to perceive people's attitudes and motivations,” and “use this ability to get what they want out of a situation.” Hmm, this sounds exactly like some of the salespeople I’ve met and have distrusted immediately…

So what is the “typical” real estate personality? Yesterday, I saw a sign nailed on a post that said “Real Estate Investment Asst. 20K/month” and a phone number. I just had to call to hear the scam. The recorded message sounded like a carefully read and somewhat wooden script. Basically, the person said that if I were one of 2 types, someone who is between jobs or already in real estate (ie. between jobs), I could learn how to be an investor! So, what they’re looking for is enough people to pay them 20k a month! It’s a sad estate of affairs, but a lot of people in real estate are those who couldn’t make a decent living doing what they used to do. 90% of them drop out the first year because they can’t make it, and the money they pay in learning the business provides income to their trainers. Many people who go into real estate are desperate to make money, and so they’re aggressive and cut corners. If they’re the types who would cheat on a quiz in school because they could get away with it and it was easier than studying, they’re likely to continue doing so. Some portion of the realtor population is caring and smart, and you can find them, but watch out for the rest!

To find out more about yourself, try the test and rest about your personality. But be warned, the results will be skewed if you're not honest with yourself!

Beyond Double-ending

California is a state where dual agency is still allowed as long as it’s disclosed. It’s considered dual agency when the seller and the buyer are represented by different agents that belong to the same company. In this case, the broker is considered the same agent.

When the same individual agent actually represents both buyer and seller, this is referred to as “double-ending.” The odds are (or should be) against it happening, so when I see an agent doing a lot of it, I have to wonder what’s going on.

Then there are the realtors who are also loan people, and they’re also getting a commission off of the loan. Now, I’ve seen some people do a competent job as both realtor and lender when they have assistants, but I’ve never seen one do a very good job with the paperwork, and I’ve seen some who are lawsuits waiting to happen. The following was one that, thank goodness, didn’t get away with what amounted to quadruple-ending. (Please note that the names have been changed to protect the … ignorant.)

A while back, I had a listing that was priced a little high, but which we knew would appraise without stacking. A week after the house went on the market, another house 2 blocks over and very similar came on 10k higher. I made a note of it as I was doing weekly comparative market analyses for my sellers and then didn’t think about it again.

A few days went by, and my sellers got an offer that didn’t quite make sense to me. For one thing, it was for 10k over and asked for 10k in closing costs. It was 100% financed, so the buyer was going to be getting her earnest deposit back. None of this made any sense since there was no way the house would appraise.

The agent’s name on the fax cover was Angela H. The lender letter was signed by Elaine Davis who was with a different company. However, when I called the lender’s number, the person who answered gave the name of the real estate company. I was puzzled and asked if there was more than one Angela. They said, “no,” and I was given to Angela who explained that her husband’s last name was so long and foreign that she always put “H.” I asked her about her buyer, and she explained that her buyer was an investor who was also buying the house around the corner. I was perplexed as I’d been told before by another lender that investors need to have at least 10% down or no one would be willing to lend them the money. (As a rule, 100% financed only works for owner-occupied as people have been shown to be more likely to make payments on their own residence than on a house they’re not living in when they run into financial difficulties.) I explained to the agent that I would present the offer but that it was unlikely that the house would appraise at that amount, to which she gave a surprised, “Oh.”

Out of curiosity, I got on the MLS and saw that yes, the other house was in escrow and taking back-up offers. I noticed that the agent I had just spoken to was the listing agent, and then saw in the remarks section that the agent was one of the sellers. Out of curiosity, I double-checked the tax records and saw only one person noted as an owner, a certain Angela Davis…

That’s when I realized that Angela H. was related to Elaine and that the real estate company and mortgage broker were run by the same people albeit with different company names. Angela was the seller, the listing agent, and the buyer’s agent for her own property. She was also attempting to be the same buyer’s agent for my listing. Her female relative was going to get the lender’s commission on both transactions. (Wait, this is even beyond quadruple-ending as there are 5 commissions involved not even counting the seller’s proceeds…)

When I presented the offer to my sellers, I told them about these other details, and they were pretty impressed with the agents’ attempt to make so many commissions. I explained to them that as long as all the proper disclosures were made, there wasn’t anything illegal about the other transaction. Having already gone over a number of comparative market analyses with me, they understood that the offer was utterly meaningless because neither house would appraise and no backer in his or her right mind would finance the undertaking, so they rejected it outright.

I let Angela know about the rejection, and she said her buyer would be disappointed. I told her that my sellers were uncomfortable with the financing and would prefer it if the buyer put some money down. She said she would talk to her buyer about submitting another offer, and that was the last time I spoke to her.

About 2 weeks later, I was doing an updated CMA for my sellers when I saw that the other house had fallen out of escrow and then was changed to “expired” without any attempt to put it back on the market. My guess is that the house didn’t appraise, and hopefully the buyer caught on that something didn’t smell right. I suppose that it’s not impossible that the buyer was also a relative who would somehow benefit, but I’m not sure how…

So the good news in this instance is that the transactions didn’t go through, and no one got hurt (that I know of). My sellers lowered their price a little and got a buyer who stacked some closing costs. The appraisal came in slightly higher, and the escrow closed with only some of the usual, less exotic delays.

The other agent was definitely trying to pull something unethical but not altogether illegal. As she was going beyond some very specific limits (investor guidelines and an appraiser who apparently wasn’t a relative), she couldn’t make it work. In a way, the limitations functioned better than laws because, as you know, laws can be broken.

I do wonder sometimes if there are cases where the transaction does go through. There’s a house across the street from another listing I have that sold some months ago for about 100k more than it was worth. The listing agent double-ended it and it went into escrow after 0 active days on the market. The house was 100% financed. Hmm, was that appraiser a relative?

He found it on Mapquest and bought it on Ebay ...

I had a funny experience the other evening. I got a call from Australia from someone who had bought a piece of land that he believed to be in the city of San Bernardino. He had already spoken to another realtor who couldn't find the APN but thought that it was worth about 157k, which was amazing considering that it had cost only about $2000 U.S.

When he told me the name of the street, I was puzzled because I'd never heard of such a street in the area even though the zip code was correct. I looked up the street name via title company records and found that it was in Cedar Creek near Lake Arrowhead. The numbers of the APN were slightly different (he hadn't given me the hyphens, and the number of 0's was off), but it was recognizable.

I then told him that he had lucked out. The lot is tiny and in an area where people build small vacation cabins though some residents stay year-round. The air is cleaner and the crime is low unlike the area where he thought he was buying, which is rather rough. (He told me that he thought that as long as it wasn't in L.A., he thought there wouldn't be any bad neighborhoods!) I also told him about the eminent domain problem near the 215 in S.B. where they're planning to put a lake.

He told me that he'd looked up the address on Mapquest, and I had to laugh. When Mapquest doesn't recognize an address (which it wouldn't have in this case as he didn't even have the right city), it says that it has located a "similar" address, and then sticks a star somewhere in the middle of the area it thinks you're looking for. It was Mapquest that had given him a random S.B. zip code.

So no, he didn't get something for a lot less than what it's worth. It was a bargain in that it could go for about 10k to 15k on the market at this time, but it could take a while to sell. Now, he just has to make sure that the other person on title will also sign the grant deed or has gotten herself off title. And then if he ever comes out here, he can build on it or go camping...